Page 312 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 12: Divisible Profits and Managerial Remuneration

(a) there is a manager to assist the directors. Notes
(b) there is none other out of the manager, managing director and whole-time director
to assist the directors.

18. Babita Ltd. has 3 whole-time directors on its board, the others being part-time directors.
From the following particulars of the company, calculate the maximum remuneration
payable to the whole-time directors and the part-time directors, assuming that the
remuneration payable to the whole-time directors is to be calculated on net profits
remaining after payment of commission to part-time directors, and the commission to
part-time directors is to be calculated on net profits remaining after payment of
remuneration to whole-time directors.
Profit earned by the company 10,00,000
The above profits have been ascertained after taking into account the following:
Depreciation on fixed assets 1,91,200

Provision for income-tax made 4,90,000
Capital expenditure relating to cost of a showroom has been included in general
Expenses charged to profit and loss a/c 50,000.
You are informed that the depreciation admissible as

Per schedule XIV amounts to 1,31,200.
19. The following was the profit and loss account of Anand & Company Limited as on 31st
March, 2005:

Particulars Particulars
To salaries 1,80,000 By gross profit 9,00,000
To manager’s salary 24,000
To director’s fees 12,000
To depreciation 1,20,000
To general charges 1,26,000
To general reserve 90,000
To interest on debentures 45,000
To taxation 2,10,000
To net profit 93,000
9,00,000 9,00,000

All the expenses are allowable for taxation. Calculate income tax on company’s profit @

40%. The annual salary of the manager of the company is 24,000. He also gets 3%
commission on divisible profits arrived at after deducting his salary and taxation.
Depreciation includes 30,000 for development rebate. Find out the manager’s
remuneration and income tax.
20. Babli and Company Ltd. employs a manager and three whole-time directors. It pays 5%
commission to the manager and 2% to each whole-time director. The commission payable
to the manager is calculated on the profit left after charging his commission and the
commissions of whole-time directors and the commission payable to the whole-time
directors are calculated on profit left after charging their commission and commission of
manager as per Companies Act after taking into consideration the following information:

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