Computation Of Taxable Profits

Wednesday, December 11, 2013

Computation Of Taxable Profits

              The general principles governing the computation of taxable profits of a business are  below;-


1)Profits should be computed in accordance with the method of accounting regularly employed by the provided the true profits can be deducted from such method.
2)Expenses expressly allowed should be deducted from gross receipts,will expenses expressly or disallowed should not be so deducted.
3)Certain expenses and business losses should be from gross receipts,provided such expenses and losses are really incidential to the trade.
4)Deduction can be permitted only in respect of those expenses and losses which are incurred in the relevant accounting year;
5)Expenses which relate to a business closes before commenecment of the accounting year cannot be deducted from the profits of a separate existing business.Expenses of a dead business become capital losses.
6)Speculation losses can be set off only against speculation profits.:---

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LAW OF INCOME TAX

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