Mercantile and cash system

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Amit (Querist)
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21 March 2009 Who can adept cash or Mercantile system of accounting ?

What is the major difference in cash and mercanile system of accounting ?

Can a company follow cash accounting system ?

please also tell when it can follow cash accounting and mercantile system of accounting ?

HUZAIFA HUSSAIN

HUZAIFA HUSSAIN (Expert)
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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.

Amit

Amit (Querist)
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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

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Amit

Amit (Querist)
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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

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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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.