Which statement about skimming income in small businesses is correct?

• A. Skimming income is ethical and legal.
• B. Skimming income is ethical but illegal.
• C. Skimming income is unethical and illegal.
• D. Skimming income has no ethical implications.

Answer: (C)

Skimming income is taking cash or keeping receipts off the books, so the business shows less income than it actually earns. That deception is unethical because it betrays trust and fairness—owners, employees, customers, and lenders rely on honest reporting. It’s also illegal, since underreporting income and taxes constitutes fraud and tax evasion, with potential criminal and civil penalties. Even small, one-time skims matter because they illegalize the conduct and undermine the financial system of the business. For these reasons, the behavior is understood as both unethical and illegal. In practice, strong internal controls and clear cash-handling procedures help prevent it and protect the business from harm.