Page 299 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Accounting for Companies-I

Notes
Particulars Particulars
To salaries & wages 70,000 By gross profit 31,10,000
To director’s fees 40,000 By profit on sale of building:
To repairs 40,000
To general expenses 17,000 Cost 6,40,000
To compensation for breach of contact 10,000 W.D.V. 3,00,000 3,40,000
To depreciation (including 2,00,000 By subsidy from Central Government 60,000
development rebate of 20,000 and
initial depreciation of 10,000)
To loss on sale of vehicle (w.d.v. 3,000
5,500)
To loss on sale of investment 15,000
To scientific research (new laboratory) 2,00,000
To donation to charitable institutions 20,000
To interest on debentures 40,000
To interest on secured loans 10,000
To debenture trustee remuneration 10,000
To investment revaluation reserve 5,000
To brought forward trading losses 30,000
To income tax 10,00,000
To proposed dividend 10,00,000
To balance c/d. 8,00,000
35,10,000 35,10,000
Solution:

Calculation of net profit for managerial remuneration u/s 349
Particulars
Net profit as per p.& l. a/c (given) 8,00,000
Add: inadmissible items:
(a) Development rebate 20,000
(b) Initial depreciation 10,000
(c) Loss on sale of investment 15,000
(d) Scientific research 2,00,000
(e) Investment revaluation reserve 5,000
(f) Income tax 10,00,000
(g) Proposed dividend 10,00,000 22,50,000
30,50,000
Less: Capital profits on sale of building 40,000
Net profit for the purpose of managerial remuneration 30,10,000
alternatively, net profit for managerial remuneration may be calculated by taking gross profit
of the company.

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