METHOD OF ACCOUNTING IN

PROFITS AND GAINS OF

BUSINESS OR POFESSIONS

Presented by
SURAJ KUMAR SAHU
WHAT IS PGBP?
It means any income which is shown in profit and loss
account after considering all allowed expenditures.
Business:

It includes any trade, commerce, and manufacturing

activities.
Profession:

It means an occupation requiring specialized knowledge

and skill like that of CA, lawyer, Doctor etc.
METHODS OF ACCOUNTING:
There are two methods for calculating PGBP

1. CASH BASIS
2. MERCANTILE BASIS
CASH SYSTEM:
A record is kept of actual receipts and actual payments

of a particular year when it is paid and received.

If books of account are kept by an assesse on the basis

of cash system of accounting, income actually collected

during the previous year is deductible irrespective of the
fact whether it relates to the previous year or some
other year.
 For example:

if you pay your telephone bill on say 15th April 2012, it

will be accounted for in the financial year 2012-13 (1-
Apr-2012 to 31-Mar-2013) although the bill may be
pertaining to the month of March 2012.
MERCANTILE SYSTEM:
In this system, net profit or loss is calculated after taking

into consideration all income and expenditure of a

particular accounting year irrespective of the fact
whether income is not received or expenditure is not
actually paid during the accounting period.

Similarly, expenditure of business or profession, relating

to the PY, is deductible even if it is not paid during the PY.

 For example:

Salary relating to a particular year is taxable in that

year itself irrespective of whether it is actually received
or not.
THANK YOU