28 October 2021
The limit of 5% receipt in cash or payments in cash is not limited to sale or purchase transactions. It rather covers all receipts and payments in cash including sales and purchases.
In general receipts in cash of the following nature are included-
Receipt on Sale of goods and services Receipt from debtors for the current year sales/outstanding receivables from earlier years Sale of fixed assets Sale of scrap Receipt of Loans and Advances Trade advances Receipt of deposits Sale of investments
Some typical payments in cash of a business concern included are- Payments for Purchases Payment to Creditors for current year purchases/outstanding creditors Purchase of Fixed Assets and other Capital Expenditure Payments for salary, electricity, telephone charges, and other revenue expenditure Payments for Insurance Repayment of Loans and Advances Loans given Trade Advances given Deposits made, etc.
In computing the turnover limit of 5% in cash, the law states that the aggregate of all receipts in cash and aggregate of all payments in cash shall not exceed 5% of total receipts and payments.