The company is set up as an S-Corp, if that matters.
The company's owner trusted the General Manager to run the day-to-day operations. Owner is not computer literate and did not try to get involved until just this last month, when he realized the company was not turning a profit and decided to investigate.
As it turns out, the GM has put nearly $30k worth of alcohol purchases, household groceries, snacks from the gas station, etc. onto the business' credit card in the current year alone. He hid them in various accounts, such as "advertising and promotion." He also kept no receipts, even for VALID purchases. So his entire "office supplies" account cannot be verified.
But to make things worse, as soon as the owner started figuring this out and the GM realized he was busted, the GM quit and walked out the door.
I was hired at that point to come in and clean up this company's books. Put things in the correct accounts, organize their bills, get caught up on overdue payments to vendors, etc. However, I have never encountered a situation in which a non-owner put personal purchases in the business' accounts and I am not sure the best way to go about fixing this. I highly doubt the GM will ever pay back any of the expenses he incurred and since he's no longer on payroll, it's not like we can dock his pay...
This is going to be a net loss for the company, but what account would you put this into? What will the tax liability be at the end of the year?
