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Taxation law

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Answered Same Day Mar 18, 2020

Solution

Pulkit answered on Mar 21 2020
139 Votes
The taxpayer can opt to pay tax as per the cash method of accounting in case of business income when such business income is derived majorly from application of knowledge or skill possessed by the taxpayer (Taxation Ruling TR 98/1). We can assume that Jane has opted to pay tax on receipts basis and thus only the sales consideration received in cash will be offered to tax in the cu
ent year. The earnings method on the contrary is based on the concept of periodicity. The income will be reported in the period in which it is earned i
espective of the fact that in which period the cash is received.
The receipts method is the one when income is booked on actual receipts of the cash i
espective of the fact that when has it been earned. That is to say the income and expenses of the business are based on the inflows and outflows of the cash in and outside the business. Furthermore, it is simpler form of accounting method as compared to the earnings method. Earnings method is a more typical method of accounting as compared to the receipts one. Thus receipts method is furthermore based on cash and thus...
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