Section 25 (2) of the Internal Revenue Act, 2000 (Act 592) as amended, states that unless the Commissioner-General prescribes otherwise in a particular case, a person shall account for tax purposes on a cash or accrual basis. However, this is subject to the provisions under section 23 (1) and (3) of Act 592.

A company shall account for tax purposes on an accrual basis as provided for under section 25 (3). Thus, a company cannot account for tax purposes on cash basis.

A person may apply in writing for a change in that person’s method of accounting and the Commissioner-General may, by notice in writing, approve the application but only if satisfied that the change is necessary to clearly reflect that person’s income.

If the person’s method of accounting is changed, adjustments to items of income, deduction, or credit shall be made in the basis period following the change, so that an item is not omitted nor taken into account more than once.

A person who is accounting for tax purposes on a cash basis shall account for amounts to be included in calculating that person’s income when they are received by, or made available to that person.

An outgoing or expense is incurred by a person who is accounting for tax purposes on a cash basis when it is paid by that person.

A person who is accounting for tax purposes on an accrual basis shall account for amounts to be included in ascertaining that person’s income when they receivable by that person.

An outgoing or expense is incurred by a person who is accounting for tax purposes on an accrual basis when it is payable by that person.