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BOOKS OF ACCOUNTS

RAJ KUMAR (FINANCE MANAGER) (1393 Points)

16 August 2010

HELLO FRIENDS, CAN ANYBODY TELL ME WHATHER A CA HAS TO MAINTAIN HIS BOOKS OF ACCOUNTS ON CASH BASIS ONLY OR MERCHANTILE BASIS.

AND PLEASE TELL ME WHETHER TO PREPARE ONLY PROFIT AND LOSS A/C IN HIS CASE.

PLS. EXPLAIN CLEARLY.

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3 Replies

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 16 August 2010

DEAR RAJKUMAR,

AS PER SECTION 145, IF IS AN OPTION TO THE ASSESSEE TO EITHER PREPARED THE ACCOUNTS ON MERCANTILE OR CASH BASIS.

HOWEVER, IF THE ASSESSEE IS A COMPANY, THEN AS PER THE COMPANIES ACT, IT HAS TO MAITAIN THE BOOKS OF ACCOUNTS ON MERCHANTILE BASIS. AND CASH BASIS IS NOT ALLOWED TO THEM UNDER THE COMPANIES ACT.

HOWEVER FOR AN INDIVIDUAL CA OR PARTNERSHIP FIRM, IT IS AN OPTION TO MAINTAIN ON ANY OF THE BASIS AS MENTIONED ABOVE. ONCE BASIS OF ACCOUNTING IS SELECTED, IT HAS TO BE FOLLOWED CONSISTENTLY. IF NOT, THE FINANCIAL EFFECT HAS TO BE QUANTIFIED AND TO BE SHOWN IN ITR...

REGARDS,

MANOJ

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Kalpesh Chauhan, (Tax Assistant (Accounting Technician CA FINAL CS PROF. PROG. B.Com)) (8311 Points)
Replied 16 August 2010

Originally posted by : Manoj B. Gavali
	DEAR RAJKUMAR, AS PER SECTION 145, IF IS AN OPTION TO THE ASSESSEE TO EITHER PREPARED THE ACCOUNTS ON MERCANTILE OR CASH BASIS. HOWEVER, IF THE ASSESSEE IS A COMPANY, THEN AS PER THE COMPANIES ACT, IT HAS TO MAITAIN THE BOOKS OF ACCOUNTS ON MERCHANTILE BASIS. AND CASH BASIS IS NOT ALLOWED TO THEM UNDER THE COMPANIES ACT. HOWEVER FOR AN INDIVIDUAL CA OR PARTNERSHIP FIRM, IT IS AN OPTION TO MAINTAIN ON ANY OF THE BASIS AS MENTIONED ABOVE. ONCE BASIS OF ACCOUNTING IS SELECTED, IT HAS TO BE FOLLOWED CONSISTENTLY. IF NOT, THE FINANCIAL EFFECT HAS TO BE QUANTIFIED AND TO BE SHOWN IN ITR... REGARDS, MANOJ