Page 305 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Accounting for Companies-I

Notes Solution:
Calculation of Net Profits for Managerial
Remuneration U/S 349
Particulars
Net profit as per p. & l. A/c 7,50,000
Add: inadmissible items:
Excess depreciation on fixed assets ( 1,43,400 – 98,400) 45,000
Provision for taxation 3,67,500
Capital expenditure included in general expenses 37,500 4,50,000
Net profit for the purpose of managerial remuneration 12,00,000

Calculation of Managerial Remuneration

10% will be the maximum remuneration payable to the whole-time director. This will be
calculated on that profit which is left after charging the commission to part-time directors.
1% will be the maximum remuneration payable to the part–time director and that will be
calculated on the profit left after charging the commission to the whole-time directors.
To compute both remunerations, we assume that the whole-time director’s remuneration is x
and part-time director’s remuneration is y.

 x = 10% of ( 12,00,000 – y) and
y = 1% of ( 12,00,000 – x)
Now we find the following two equations–
10x + y = 12,00,000 …(i)

100y +x = 12,00,000 …(ii)
On multiplying the (ii) equation by 10 and then subtracting it from (i)
10x + y = 12,00,000 …(i)
10x ± 1000y = 120,00,000

– 999y = –108,00,000
108,00,000
y = = 1,811 (approx).
999
On substituting the value of y in the (i) equation –

10x + 10,811 = 12,00,000
10x = 12,00,000 – 10,811


12,00,000 108,11
x 
10
x = 1,18,919 (approx).

Thus, remuneration to whole-time directors 1,18,919

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