ACCOUNTING
Accrual Basis of Accounting
On the other hand, accrual basis of accounting, recognized income when it is earned and recognizes expenses when they are incurred:
- The firm will expense raw materials consistently as they are used and not in one single charge when they are paid for.
- The firm will record income when all responsibilities pertaining to the sale have been fulfilled and the firm has a right to claim money from the customers.
- Advance cash received will be treated as a liability. The firm will either have to return the cash back or provide services in lieu of the same.
We use a combination of cash and accrual basis of accounting. The profit and loss account and balance sheet are prepared as per accrual basis while the cash flow statement tells about the cash situation of the firm.
COMPANY LAW
COMPANIES AMENDMENT 2020
The Companies Amendment Bill 2020 was introduced in Lok Sabha on March 17, 2020. Continuing its endeavors in increasing the Ease of Doing Business in India, the Government has proposed to decriminalize those minor offenses which do not harm the public at large and are only becoming a burden on the legal framework. Govt. has also proposed to bring down the amount of the penalties that can be imposed on the defaulting Companies and its officers in default. For example in Section 92 (5) of the Companies Act, 2013, If any company fails to file its annual return, before the expiry of the period specified by the Companies Act, 2013; such company and its every officer who is in default shall be liable to a penalty of fifty thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of five lakh rupees. It has been proposed to be revised the said penalties to: ‘If any company fails to file its annual return under sub-section (4), before the expiry of the period specified, such company and its every officer who is in default shall be liable to a penalty of TEN thousand rupees and in case of continuing failure, with further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of TWO lakh rupees.’ The Govt. has also introduced provisions which allow a certain class of companies to list their shares on Foreign Exchanges while giving them exemption under the provisions of Section 89, 90 and 127. One of the major amendments is proposed in Section 135 of the Companies Act, 2013. Section 135 relates to the Corporate Social Responsibility (‘CSR’) of the Companies. At present the Section provides for the following: 1. Applicability of CSR: Every company having a net worth of rupees 500 crores or more, or turnover of rupees 1000 crore or more or a net profit of rupees 5 crores or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors. 2. Disclosure of CSR in Board’s Report: The Board’s report of the Company shall disclose the composition of the Corporate Social Responsibility Committee. 3. Duties of the CSR Committee: The Corporate Social Responsibility Committee shall,- (a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company in areas or subject, specified in Schedule VII; (b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and (c) monitor the Corporate Social Responsibility Policy of the company from time to time.