Page 297 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Accounting for Companies-I

Notes (l) Any compensation or damages to be paid by virtue of any legal liability including
a liability arising from a breach of contract.
(m) Any sum paid by way of insurance against the risk of meeting any liability such as
referred to in clause (l).
(n) Debts considered bad and written off or adjusted during the year of account.
4. But the following items shall not be deducted from the gross profits of the company:

(a) The income tax and super tax payable by the company under the Indian Income Tax
Act, 1961 or any other tax on the income of the company not covered under clauses
(c) and (d) above.
(b) Any compensation or damage paid by the company voluntarily.
(c) Loss of capital nature including loss on sale of undertaking or any part thereof not
including any excess of written down value over its sale proceeds or scrap value of
any excess of written down value of any assets sold, discarded, demolished or
destroyed as this excess is written off against p & l a/c.

Notes The profit calculated as per above provision is considered profits for the purpose of
remuneration to directors, managing directors and manager. On the basis of this profit,
the managerial remuneration is computed.

Self Assessment

Fill in the blanks:
5. The provisions regarding the manager's remuneration are found in section .........................
of the Companies Act.
6. Net profit for the purpose of managerial remuneration is calculated u/s .........................
7. Minimum amount of overall remuneration is determined on the bases of .........................
True or False:

8. Overall managerial remuneration is calculated u/s 198.
9. There can be more than one whole-time directors simultaneously in a company.
10. The managing director of the company must be a shareholder.
11. The maximum limit of manager's remuneration is 15% of profit u/s 387.

12. Section 209 relates to the provisions of managing director's remuneration.
13. If there is no whole-time director or managing director or manager in a company, part-
time director's maximum remuneration can be paid 5% of the profit of the company.

14. Net profit for the purpose of managerial remuneration is calculated u/ss 349 & 350.
15. Managerial remuneration is always calculated on the profit before tax.

Example 1: Determine the maximum remuneration available to the part-time directors
and managers of Babli and Bunty ltd. under sections 309 and 387 of the Companies Act, 1956
from the following particulars:

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