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Ch -2 framework for preparation and presentation of f.st
Accountancy
Since the maintaining accounts on accrual basis is mandatory as per sec 128(1) then why in any case income/expense is recognised on cash basis ?
Answers (6)
Shyam Sundar B
In those highlighted lines what they're trying to tell is the Accrual basis is an implied one .. If you're recognising any income or expense on cash basis you should state that expressly ..
But accrual is mandatory as per company act 2013 ?
Thread Starter
Atharv SankliyaBut accrual is mandatory as per company act 2013 ?
If it is mandatory, then why is there a choice to disclose if accounts are maintained on a cash basis..
Thread Starter
Atharv SankliyaThat's what I am asking
Your point is correct.. I think I have no answer for this
Shyam Sundar B
If it is mandatory, then why is there a choice to disclose if accounts are maintained on a cash basis..
If you follow pure accrual you can't enter advance received or prepaid expense in the books as the income is not accrued or benefit is not received. This point explains that you can't mix prepaid expense/ advance received and normal revenue/expense. Because one is recorded based on cash receipt or payment and other is in accrual. This is what I understand. Hope this helps.
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