Calculate the managerial remuneration from the following particulars of Ganga Ltd. due to the managing director of the company at the rate of 5% of the Net Profits. Also determine the excess remuneration paid if any : ₹

CS Executive · Company Accounts & Auditing Practices · PYQS · December 2019
Calculate the managerial remuneration from the following particulars of Ganga Ltd. due to the managing director of the company at the rate of 5% of the Net Profits. Also determine the excess remuneration paid if any : ₹ Net Profit 2,10,000 Net Profit is calculated after considering the following: ₹ (i) Depreciation 40,000 (ii) Preliminary Expenses 10,000 (iii) Tax Provision 3,10,000 (iv) Director's fees 8,000 (v) Bonus 25,000 (vi) Profit on Sale of Fixed Assets (Original Cost ₹20,000; Written down value ₹11,000) 15,500 (vii) Provision for Doubtful Debts 9,000 (viii) Scientific Research Expenditure (for setting up new Laboratory) 20,000 (ix) Managing Director's Remuneration Paid 30,000 Additional Information: (a) Depreciation allowable under Schedule II of the Companies Act, 2013 is ₹35,000. (b) Bonus liability as per Payment of Bonus Act, 1965 is ₹18,000. (c) Provision for doubtful debts is not required looking to the past records of debtors.

Answer & Explanation:

Calculation of Profit for the purpose of Managerial Remuneration Particulars Amount in ₹ Amount in ₹ Net Profit 2,10,000 Add: Depreciation 40,000 Preliminary Expenses 10,000 Tax provision 3,10,000 Bonus (to be treated separately) 25,000 Provision for Doubtful debts 9,000 Scientific research expenditure (for setting up new laboratory) 20,000 Managerial Director's remuneration Paid 30,000 4,44,000 6,54,000 Less: Bonus liability as per payment of Bonus Act, 1965 18,000 Depreciation Allowable (under Schedule II of Companies Act, 2013) 35,000 Capital Profit on Sale of Fixed Assets (WDV + Profit on sale - Original Cost (11,000 + 15,500 - 20,000)) 6,500 (5,95,00) Profit under section 198 5,94,500 Computation of Managerial Remuneration Particulars Amount in ₹ Remuneration payable to Managing Director @ 5% of ₹5,94,500/- 29,725 Remuneration already paid to MD (30,000) Excess remuneration paid 275

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