Journal Entry #1

Issue: Deducting or not deducting personal expenses on a business tax return.

Facts:
Per IRS regulation, it is illegal to deduct personal expenses on a business income tax
return.
All expenses deducted on a business tax return must relate to the business that the tax
return is being prepared for.
The owner of a business must keep personal financial records separate from business
financial records.
If a business is caught deducting non-deductible expenses on an income tax return, they
are subject to fines, penalties and interest. In extreme cases, where intent can be proved,
the business owner(s) can be charged in a court of law.
Joe Smith is the sole owner of Structures Unlimited, LLC.
Joe Smith instructed his company accountant to deduct his personal expenses on the
business income tax return.
For multiple years tax returns, Joe Smiths personal expenses were deducted on the
business tax return, lowering his total tax liability by many thousands of dollars.
Ethical Question:
Should Joe Smith be reported to the IRS by his company accountant for fraudulently deducting
personal expenses on his business income tax return?
List of Arguments:
Turn in to the IRS
1. It is illegal to deduct personal expenses.
2. Joe Smith has committed a crime and should be punished.
3. It is unfair that he has had to pay thousands of dollars less in tax by cheating the system.
4. Company accountant is ethically bound to to follow the law as an accounting
professional.
1.
2.
3.
4.

Dont turn in to the IRS

Company accountant could be fired for reporting the boss.
Business could go bankrupt and all employees lose their jobs.
Joe Smith could decide to close the business and all employees lose their jobs.
Joe Smith could blame the company accountant and claim he had no knowledge of
personal expenses being deducted on the business income tax return.

Decision: My decision was to not report Joe Smith to the IRS. I lost many nights sleep over
this decision. I have alway felt duty bound by ethics and this flew in the face of my moral and
ethical integrity. There were many peoples jobs at stake and the risk that Mr. Smith would
blame me was very high. Mr. Smith did not have a good moral compass and would have thought
nothing of implicating me as the sole culprit. He could have destroyed me and my career if I had
reported him.

This decision was consequentialist. I weighed what was the greater good for me, the employees
of the company and their families, and Joe Smith. I determined that for me, it was more
important that I keep my job, for the employees and their families, it was more important that the
business remain open and they remain employed, and for Mr. Smith, unfortunately he continues
to get away with submitting fraudulent tax returns to the IRS. Principle of benefit maximization:
Keeping all of the employees employed outweighed Mr. Smiths fraud.
Journal Entry #2
Issue: Favoritism in grading students
Facts:
Students in the classroom are graded on multiple assignments throughout the semester.
Students are given rubrics to identify how grades are determined for each assignment.
The Junior High Principal decides at the beginning of each year what percentage
constitutes an A, B, C, etc.
Students are given multiple summative assessments that are graded throughout the
semester.
All grades from throughout the semester are weighted to give a final grade for the
semester.
Teachers have limited discretion on the final grade.
Ron Johnson teaches 8th grade social studies.
Mr. Johnson is a veteran teacher, having taught this class for over 15 years.
Several students have told stories of how Ron Johnson gave them grades they didn't
deserve.
Ethical Question:
Should Ron Johnson be reported to the Junior High Principal for arbitrarily giving students that
he favors high semester grades regardless of their performance throughout the semester?
List of Arguments:
Turn in to the principal
1. It is not fair to the students that have truly earned high grades based on hard work to have
other students be given the same grade for far less work or effort.
2. It is not ethical of Ron Johnson to give arbitrary grades.
3. The school district has policies regarding how teachers grade and these policies are not
being followed.
4. The students who are getting the arbitrarily high grades have not earned them and are
receiving an unfair advantage on their GPA.
Dont turn in to the principal
1. Ron Johnson could come back on his colleague for reporting him to the principal.
2. Teachers should support and protect fellow teachers.
3. Its not really hurting anyone if no one finds out.

4. Ron Smith could get fired or reprimanded for his actions.

Decision: This is the dilemma faced by one of my colleagues. His decision was to not report his
co-worker to the principal. He is erring on the side of caution and not accusing his colleague of
wrongdoing. He is concerned that Mr. Johnson will find out he is the one that told and Mr.
Johnson will want revenge. He also does not have enough evidence to prove his case as none of
the students will come forward with him.
The decision was consequentialist. My colleague had to look at the greater good. He did not
have enough evidence and the damage would have been too high if he had been wrong,
potentially destroying his co-workers career. It was also in his own personal best interest to not
report.