Page 268 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 11: Profit and Loss Prior to Incorporation

3. Calculation of Rent Notes
For first four months @ 150 p.m. or 1800 p.a. (April, May, June & July 2010)
Pre-acquisition period Rent = 600
For next two months @ 150 p.m. or 1800 p.a.
Post-acquisition Period] August & September, 2010 = 300
For next three months @ 300 p.m. or 3600 p.a.
October, November & December, 2010 = 900
= 300 + 900 = 1200

4. Manager’s salary @ 4,800 p.a. for four months
(pre-incorporation period)
5. Directors’ fees @ 30,000 p.a. for five months.
Illustration 3 (Apportionment of Profit when unit cost of sales is given)
st
A Limited Company was incorporated on 1 January, 2010 with an authorized capital of 5,00,00
equity shares of 10 each, to take over the running business of a partnership firm as from 1 st
October 2009.

Solution:
The following is the summarised Profit and Loss Account for the year ended 30 September,
th
2010 :

Sales 1.10.2009 to 31.12.2009 6,000
1.1.2010 to 30.9.2010 19,000 25,000
Less :

Cost of Sales 16,000
Administrative Expenses 1,768
Selling Commission 875
Goodwill written off 200

Interest paid to vendor (loan repaid on 1.2.2010) 373
Distribution Expenses (60% variable) 1,250
Preliminary Expenses written off 330
Debentures Interest 320

Depreciation 444
Directors’ fees 100 21,660
3,340
The company deals in one type of the product.
The unit cost of sales was reduced by 10% in the post-incorporation period –
Apportion the net profit between pre-incorporation and post–incorporation period sowing the
basis of apportionment.

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