Ankit Ltd. having three whole-time directors in the Board, the others being part time directors, earned profit year ending March 31, 2021 was ₹ 13,50,000 after taking into consideration the following: Particulars ₹ Depre

CS Executive · Company Accounts & Auditing Practices · PYQS · December 2021
Ankit Ltd. having three whole-time directors in the Board, the others being part time directors, earned profit year ending March 31, 2021 was ₹ 13,50,000 after taking into consideration the following: Particulars ₹ Depreciation provided in the books 5,00,000 Depreciation allowable under Schedule II of Companies Act, 2013 4,00,000 Provision for Income-Tax 1,30,000 Directors fees 15,000 Subsidy from Government 4,20,000 Calculate the maximum remuneration payable to the whole-time directors assuming that the remuneration payable to the whole-time directors is to be calculated on net profit remaining after payment of remuneration to part-time directors and that the remuneration to part-time directors is to be calculated on the net profit remaining after payment of remuneration to whole-time directors.

Answer & Explanation:

Calculation of Remuneration Particulars ₹ Profit as per Profit & Loss A/c 13,50,000 Add: Excess depreciation written off (500000-400,000) 1,00,000 Add: Provision for Income Tax 1,30,000 Net profit for calculating Managerial remuneration 15,80,000 Suppose remuneration Payable to whole-Time directors is X. Then the remuneration of Part time directors will be 1/100 x (15,80,000 - X) Profit after Part time director's remuneration will be: 1580000 - 1/100 (15,80,000- X) Therefore X = 1/10 [1580000 - 1/100 (1580000 - X)] 10X = 1580000 - 1/100 (1580000 - X) 1000X = 158000000 - 1580000 + X 999 X = 156420000 X = 156576.58 Remuneration for whole time directors = ₹156576.58 Net Profit after whole-Time Directors remuneration will be ₹15,80,000 - 156576.58 = ₹1423423.42 Thus, remuneration of Part time directors will be = 1/100 x 1423423.42 = ₹14234.23

Topics: Managerial Remuneration

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