The promoters of Shiva Ltd. took over on behalf of the company, a running business with effect from 1st April, 2017. The company got incorporated on 1st August, 2017. The annual accounts were made upto 31st March, 2018,

CS Executive · Company Accounts & Auditing Practices · PYQS · December 2018
The promoters of Shiva Ltd. took over on behalf of the company, a running business with effect from 1st April, 2017. The company got incorporated on 1st August, 2017. The annual accounts were made upto 31st March, 2018, which revealed that the sales for the whole year totalled ₹2,400 lakhs out of which sales till 31st July, 2017 were for ₹600 lakhs. Gross Profit ratio was 20%. The expenses from 1st April, 2017 till 31st March, 2018 were as follows: Particulars ₹ in Lakhs Salaries 75 Rent, Rates and Insurance 30 Sundry office expenses 72 Travellers commission 20 Discount allowed 16 Bad debts 8 Director's fee 30 Tax audit fee 16 Depreciation on tangible assets 15 Debentures interest 14 Prepare a statement showing the calculation of profits for pre-incorporation and post-incorporation periods.

Answer & Explanation:

Calculation of Pre-Incorporation and Post Incorporation Profit Particulars Total Amount Basis of Allocation Pre-incorporation (₹ in Lakhs) Post Incorporation (₹ in Lakhs) Gross Profit (20% of ₹2,400) 480 Sales 120 360 Less: Expenses Salaries (75) Time (25) (50) Rent, Rates and Insurance (30) Time (10) (20) Sundry Office Expenses (72) Time (24) (48) Travellers Commission (20) Sales (5) (15) Discount Allowed (16) Sales (4) (12) Bad Debts (8) Sales (2) (6) Director Fees (30) Post-incorporation - (30) Tax Audit Fees (16) Sales (4) (12) Depreciation (15) Time (5) (10) Debenture Interest (14) Post-incorporation - (14) Net Profit 184 41 143 Working Notes: Sales Ratio: Sales till 1st July: Sales after 1st July 600: 1800 1:3 Time Ratio: Pre-incorporation: Post-incorporation April to July: August to March 4:8 1:2

Topics: Company Accounts

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