Samuel is the sole share trader, director and employee of company. Samuel's company owns and hires out a digger and truck. The business rents the digger and truck out at a fixed rate per hour. The rate is for the backhoe, the truck and Samuel’s labor. The business never rents the backhoe or truck with Samuel’s labor. For the taxation, the company has always returned the income from its income on the basis cash received. The business does not usually extend credit and request payment on completion of a job. The company maintain simple books of accounts, recording income when received. For purposes other than taxation. The business record income on a receipt basis, although the business accounts do record debtors and creditors.

For taxation purposes should the business account for the income on a cash or accrual basis?

Answer rating: 100% (QA)

Accrual accounting involves stating revenues and expenses as they occur not necessarily when cash is ... View the full answer