Page 353 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Accounting for Companies-I

Notes (i) Excess depreciation 5,000
(ii) Compensation value 5,000 10,000
1,55,000
(–) Income other than business income 20,000

Net profit before charging commission 1,35,000
2. Commission of 1% + 10% on net profit comes to , 13,378 calculated below:

11
 135,000  13,348
111
If segregated then for Director’s Remuneration is , 1,216 and
For managerial commission is 12,162.

Notes Profit on sale of investment is excluded for calculation of commission as per
Companies Act.

Redrafted Profit and Loss A/c
(For the year ended on 31st Dec. 2006)

Particulars Particulars
To Depreciation 30,000 By Gross Profit b/d 5,00,000
To Compensation 5,000 By Profit on sale of Investment 20,000
To Other Expenses 3,40,000
To Director’s commission 1% of Net Profit 1,216
To Managerial Commission 10% of Net Profit 12,162
To Net Profit 1,31,622
5,20,000 5,20,000

Illustration 6:

E.H. Ltd. carried forward a balance of 4,25,000 in the profit and loss a/c from the year ended 31 st
March, 2006. During the year ending 31 March 2007 the company made a profit of 15,75,000
before charging Income Tax. Prepare the Profit and Loss Appropriation a/c taking into
consideration the following:
1. Provide 8,00,000 for Income Tax.
2. Transfer 1,00,000 to Dividend Equalization Account

3. Provide for dividend on 10% Preference Shares of 25,00,000.
4. Provide for dividend at 12.5% on 4,00,000 Equity Shares of 10 each.
5. Transfer 1,00,000 to Development Rebate Reserve.

6. Transfer 50,000 to General Reserve.

346 LOVELY PROFESSIONAL UNIVERSITY