The Institute of Chartered Accountants of India ( ICAI ) has released a Technical Guide on Preparation of Financial Statements under Cash basis of Accounting (February 2024 Edition).
In the realm of financial reporting, the choice between accrual basis and cash basis of accounting holds substantial significance.
While ICAI generally recommends accrual basis, some non-company entities, as permitted by laws, opt for cash basis, such as Limited Liability Partnerships (LLPs) under the LLP Act 2008 and entities under the Income Tax Act, 1961.
The guide acknowledges the diversity in the application of cash basis accounting and aims to standardize the information presented in financial statements by providing relevant provisions of Accounting Standards.
The objective of this publication is to enhance consistency and transparency in financial reporting by non-company entities following the cash basis of accounting. It emphasizes the importance of maintaining accurate books of accounts to provide reliable information for accountability and decision-making.
CA. Aniket Sunil Talati, President of ICAI, commended CA. Pramod Jain, CA. Abhay Chhajed (Vice-Chairman), and the members of the Accounting Standards Board for their invaluable contribution in bringing out this initiative.
In the preface, CA. Pramod Jain expresses gratitude to CA. Aniket Sunil Talati and CA. Ranjeet Kumar Agarwal for their continuous support and encouragement. The guide is expected to serve as a crucial resource for non-company entities, auditors, and other stakeholders.
This Technical Guide on Preparation of Financial Statements under Cash Basis of Accounting is a valuable resource for entities navigating the complexities of cash basis accounting. It is expected to promote standardization and improve the quality and relevance of financial statements for non-company entities.
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