X Ltd. was incorporated on 1st July, 2015 to acquire a running business of Barsha & Co. with effect from 1st April, 2015. During the year 2015-16, the total sales were ₹36,00,000 of which ₹7,20,000 were for the first

Statement showing the calculations of profits for the pre-incorporation and post incorporation periods: For the year ended 31st March, 2016 Particulars Total amount Basis of Allocation Pre-incorporation Post-Incorporation Gross Profit 5,86,000 Sales 58,600 5,27,400 Less: Director's Fee 50,000 Post Inc. --- 50,000 Bad Debts 7,200 Sales 720 6,480 Advertisement 36,000 Time 9,000 27,000 Salaries and General Expenses 2,40,000 Time 60,000 1,80,000 Preliminary Expenses Written Off 10,000 Post Inc. --- 10,000 2,42,800 11,120 2,53,920 Net Profit 3,43,200 47,480 2,73,480 Working Notes: Sales ratio: Sales for the period up to 30.06.2015 (₹7,20,000 × 3/6) = ₹3,60,000 Sales between 01.07.2015 & 31.03.2016 (₹36,00,000 - ₹3,60,000) = ₹32,40,000 Thus Sales ratio = 3,60,000 / 32,40,000 = 1:9 Time ratio Pre-incorporation period / Post-incorporation period = 3/9 = 1:3 Salaries and general expenses are to be allocated in this ratio.