Direct Tax Law 2009 (Solved)

Method of Accounting [Section 145]
As per section 145, for income-tax purposes, only one of the following two methods of accounting can be followed:
a)      Mercantile system;
b)      Cash system.
Further, the profits from business and profession will have to be computed in accordance with accounting standards which may be prescribed by the Central Government from time to time. The Central Government has since notified the following two accounting standards to be followed by all assessee who are following mercantile system of accounting:
a)      Accounting Standard I relating to disclosure of accounting policies.
b)      Accounting Standard II relating to disclosure of prior period and extraordinary items and changes in accounting policies.

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