On the Accounting assumption

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Dhruv@ Kum@r . $ (Querist)

09 February 2008 Dear sir / madam: who ever it is.
I am a CPT student and now I am in the articles period.Coming to the point,

One of the basic assumption in the Accounting policies is Accrual basis of accounting. My doubt is that "Service tax is paid on the actual amount received", which means mercantile basis. Is this not violating the assumption?

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)

10 February 2008 First of all I have to point out that the mecantie basis and accrual basis are one and the same. I think you mean cash basis.

Second the law merely prescribes when the payment is due. It does not say when you have to account for the liability. These two are different.

Dhruv@ Kum@r . $

Dhruv@ Kum@r . $ (Querist)

10 February 2008 Sorry Srinivasan sir, I think I have not presented my doubt properly.

I have read that "The Service Tax is paid only on received basis". One of the basic assumption in accounting is that an enterprise follows accrual basis of accounting. But as per the service tax rule, the tax is paid only when the realization occurs, it means the method of accounting followed is cash basis. Why does these two rules get clashed?

I could not unserstand the second point sir. Can you be a little more brief....Plzzzzzz I am just a CPT student. I cannot understand unless it is in brief to me, so plz make it little brief sir.....

Thanking you,

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