21 March 2009
professionals can adopt cash or mercantile system of accounting
in cash system cash receipts and payments on actual basis is to be accounted for whereas in mercantile system all income and exps. pertaining to financial year is to be accounted for whether reced or not and whether paid or not.
Company has to follow mercantile system of accounting only.
21 March 2009
Thanks for your prompt reply. However kindly advise why do we, then, mention that the 'company follows mercantile system' in notes to accounts and 3CD reports
21 March 2009
Thanks for your prompt reply. However kindly advise why do we, then, mention that the 'company follows mercantile system' in notes to accounts and 3CD reports
21 March 2009
Section 145 of The income tax Act,1961 says income chargeable under the head'profits and gains of business or profession' or 'income from other sources' must be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee.In view of this a non corporate assessee has to mention his/its method of accounting employed in the previous year in Form 3CD. Corporate assessees ,unless exempted by the Companies Act,1956, is required to keep books of accounts on accrual basis vide section 209 of the said act which makes them mandatory to show the method of their accounting in Form 3CD as well.
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