Understanding the Accrual Basis Method of Accounting and Exemptions in Company Taxation, Study notes of Business Taxation and Tax Management

Download Understanding the Accrual Basis Method of Accounting and Exemptions in Company Taxation and more Study notes Business Taxation and Tax Management in PDF only on Docsity! LESSON 4.9 HEADS OF INCOME (SECTION 11) Method of accounting (Section 32)  Cash Basis or  Accrual Basis  For Companies ‘Accrual Basis’ method of accounting is compulsory [Section 32(2)]  Change of Method of Accounting can be made under [Section 32(4)] Rules to Prevent Double Derivation of Income and Double Deductions (Section 73) Where:  Any amount chargeable to tax on the basis that it is receivable, the amount shall not be charged that it is received; Or  Any amount is chargeable to tax on the basis that it is received the amount shall not be chargeable to tax again on the basis that it is receivable. With regard to expenditure, where:  Any expenditure is deductible on the basis that it is payable, the expenditure shall not be deductible again on the basis that it is paid; Or  Any expenditure is deductible on the basis that it is paid, the expenditure shall not be deductible again on the basis that it is payable. Exemptions and Tax Concessions: Section 41 to 53, section 102 and various clauses of second schedule to the ordinance deal with exemptions available to incomes or class of incomes or persons or class of persons specified therein shall be: a) Exempt from tax under this ordinance, subject to the conditions and to the extent specified therein; or b)Liable to tax at such rates, which are less than the rates specified in the First schedule? or c) Allowed a reduction in tax liability, subject to the conditions and to the extent specified therein; or d)Exempt from the operation of any provisions of this Ordinance, subject to the conditions and to the extent specified therein; Federal government has been empowered vide section 53 (2) and (3) to make amendments in the second schedule by: 1- Adding any clause or condition therein; 2 - Omitting any clause or condition therein; Or 3- Making any change in any clause or condition therein. docsity.com