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Accounting for Companies-I

Notes (a) Children’s education allowance: In case of children studying in or outside India, an
allowance limited to a maximum of 5,000 per month per child or actual expenses
incurred whichever is less. Such allowance is admissible upto a maximum of two
children.
(b) Holiday passage of children studying outside India or family studying abroad: return holiday
passage once in a year by economy class or once in two years by first class to
children and to the members of the family from the place of their study or stay
outside India, if they are not residing in India with the managerial person.
(c) Leave travel concession: Return passage for self and family in accordance with the
rules specified by the company where it is proposed that the leave be spent in home
country instead; anywhere in India.
Explanation: For the purpose of this part, family means the spouse, dependent children
and dependent parents of the managerial person.
Formula for computation of effective capital
Paid up share capital ----------------------
+ Credit balance of premium a/c. (securities) ----------------------
+ Reserve & surplus (excluding revaluation reserve) ----------------------
+ Long-term loans and deposit repayable after one year ----------------------
Total
–Investments ---------------------- ----------------------
Accumulated losses ---------------------- ----------------------
Preliminary expenses ---------------------- ----------------------
Effective Capital

12.4 Remuneration to Directors

Notes Remuneration to directors including managing directors, is determined either by
the articles of association or by a resolution or, if the articles so required, by a special
resolution, passed by the company in general meeting subject to the provisions of the
section 309 of the Companies Act.
Section 309 governs the remuneration of directors, including managing directors or whole-
time director of a public company and a private company which is a subsidiary of a public
company. Provisions of this section are as under:
(a) Remuneration to whole-time director or managing director: As per the provision of section
309(3), a whole-time director or a managing director may be paid remuneration either by
way of a monthly payment or at a specified percentage of the net profits of the company
or partly by one way and partly by the other. But except with the approval of the central
government, such remuneration shall not exceed:
(i) 5% of the net profit for one whole-time or managing director,

(ii) 10% of the net profit for more than one whole-time director.

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