Financial Statement of Company Plus Class Notes
Financial Statement of Company Plus Class Notes
Financial Statement of Company Plus Class Notes
STUDENT
MANAGERIAL REMUNERATION NOTES
"I D
/ MD
WTD/MD/Manager( Part Time Directors
Apne/Sage) (Sautele/ Paraye)
Company has Manager/MD/ of NP 1% of NP = 6% total
WTD
More than > of NP to all.
1% of NP = 11% total
->
-
:
G4T
Calculation of Net Profits :
-
-
PROFIT & LOSS A/C
DR. CR.
Expenses of Revenue Nature Income of Revenue Nature
Expenses on actual basis and not on
Provisional basis.
Subsidy received from Govt. XX
Eg: Bad debt written off and not provision for
bad debts.
ent
Expenses permitted by Company’s Act, 2013 Profit on sale of Fixed Asset ent
Depreciation (123) WDV P&L COST SP
Donation to charity/trust (181) 80 D = 20 100 130
- -
- -
⑰
......
------
Sitting fee paid to directors --
Revenue Nature Capital Nature
->
20 - 20
NET PROFIT 30X
P&L Cr .
-
-
-
-
-
stary-red- We ->
xY. =
100x1 ...
FINANCIAL STATEMENTS OF COMPANY
0- RIL x III
I
p=ICIORe
-
50008 - A
50b crove -
-
-
- -
↑
11 ove
-
1 Store STUDENT
10
.
e
*
-
-
NOTES
T
2. Company having Inadequate Profits
- -
losses
-
- -
-
· -
stones
5W ·
60 lakhs 6X18
-
-
- - -
5-100 Equal to, Greater than 5Cr. But less than 100
-
-
Cr. X
100 croves
84 lakhs -4
↓
100 258
-
Equal to , Greater than 100 Cr. But less than 6x20
-
- -
120 lakhs
250 Cr. -
-
%x
-
300 12019khs + 0 01
.
50 croves .
- -
- -
-
3
1. Paid up Capital
-
-
( Equity + Preference)
❖ X Revaluation Reserve to be excluded
⑱ 2. Reserves & Surplus ❖ P&L A/c Dr. to be deducted
❖ Preliminary expenses to be deducted
Long term payable after 12 months
3. Loan/Deposits Working capital loan/Cash credit / Overdraft are
considered as short term loans
-⑧- RIL
-
-
Exception – Incase of an Investment Company,
Investments will not be deducted for calculating
effective capital .
4. Less: Investments
This is because the purpose of such company is
to earn profits by acquiring and selling its
Investments.
4.26 ACCOUNTING
Solution
Calculation of effective capital and maximum amount of monthly
remuneration
(` in lakhs)
Paid up equity share capital 120
Paid up Preference share capital 20
Reserve excluding Revaluation reserve (150- 10) 140
Securities premium 40
Long term loans 40
Deposits repayable after one year 20
380
Less: Accumulated losses not written off (20)
Investments (180)
Effective capital for the purpose of managerial remuneration 180
Since Kumar Ltd. is incurring losses and no special resolution has been passed by the
company for payment of remuneration, managerial remuneration will be calculated on
the basis of effective capital of the company, therefore maximum remuneration
payable to the Managing Director should be @ ` 60,00,000 per annum.
Note: Revaluation reserve, and application money pending allotment are not
included while computing effective capital of Kumar Ltd.
Illustration 3
Mudra Ltd. gives the following information the year ended 31st March, 20X1:
`
Gross profit -
C 40,25,365
Subsidies received from Govt. - 2,73,925
=
sitting Feel
Interest on debentures
-
~ 31,240
-
NPBT
MR
Depr -
575345
--
0
I
-
4.27
-
less
:
Tax exp NPAT
-
NPAT Tr to Res -
Trans
Provision for Taxation X 12,42,500
-
` 5,75,345. You are required to calculate the maximum limits of the managerial
remuneration as per Companies Act, 2013. 11Y x
-
Maximum => :
an
Solution =
% . X 2735383
.
↳
42,99,290
Less: Administrative, selling and distribution 8,22,542
expenses
Director’s fees 1,34,780
Interest on debentures 31,240
Depreciation on PPE as per Schedule II 5,75,345 (15,63,907)
0
CLEAR Profit u/s 198 27,35,383
-
X oo
I Maximum Managerial remuneration under Companies Act, 2013= 11% of
I
` 27,35,383= ` 3,00,892
=
⑧
17,500 9% Preference shares of ` 100 each, fully paid up
-
-
17,50,000
8,00,000 Equity shares of ` 10 each, fully paid up 80,00,000
General
- Reserves as on 1.4.20X1 25,00,000
=
Average rate of dividend during the last three years has been 12%. ⑦
Solution
Condition II
1500
Maximum amount that can be drawn from the accumulated profits and reserves
should not exceed 10% of paid up capital plus free reserves ie. ` 12,25,000 [10% of
=-
(80,00,000+17,50,000+25,00,000)] 10 % (IUC+FR)
-
--
--
-
-
-
- 1225000
Condition III -
The balance of reserves after drawl ` 18,42,500 (` 25,00,000 - ` 6,57,500) should -3500
not fall below 15 % of its paid up capital ie. ` 14,62,500 (15% of ` 97,50,000]
Since all the three conditions are satisfied, the company can withdraw ` 6,57,500 from
accumulated reserves (as per Declaration and Payment of Dividend Rules, 2014.)
Cuw Bal 2500000 %.
9750 800 x 15
140minbal
·
=
1462500
=
- minbal= / -
,
,
Section 123
1. Sources of Dividend
a) Out of Current Year Profits
b) Out of Undistributed Profits of previous financial year or years.
c) Combination of Above 2
d) Money received by central and state Govt. for the purpose of distribution of dividend
Free Reserves - Reserves that can be used by the company for distribution as dividend.
catejas suchak
When dividend is distributed out of
Provisions relating to
Depreciation X
Losses
1. Provide for current year depreciation
- -
Before distributing dividend, a company should provide for
2. 2. Provide for arrears of depreciation of the previous financial year losses
preceding financial years.
-
-
nHeatDepenre
WDV of the asset and the selling price
·
:
should be charged to P&L.
WDV = 50 ➔ Sale = 20 P&L = 30
Destroy = 0 P&L = 50 ene
Demolish = 0 P&L = 50
Scrap =5 P&L = 45
ca tejas suchak
DISTRIBUTION OF DIVIDEND OUT OF RESERVES
Profit =
1700000
7 1
1000 -
Examples of Reserves that are not Free Reserves – I Avg Rate of 3 years
/ ↓
Iperific
.
ision
2. CRR
=
specific
3 15 (PUL)
% Res-
3. Securities Premium
4. Revaluation Reserve & 10. 91 or
->
London j
5
.
5. DRR
FR :
IOL Education Marriage
0 Fund
200000 300000
Fund
300000
i
While distributing dividend out of Reserves the lowest of the 3 tests is permissible –
1
- -
-
#.
1. Maximum Rate of Dividend - Free Res
-
The Rate of dividend in Current FY cannot exceed the average rate of dividend of past 3 FY.
- - =
100/-
-
- - - -
3% 00of
Pit it
↳sold=00
-
-
--
= 10%*(Paid Capital+ Free Reserves) *Note – Paid up Capital = Equity+Preference
- .
- -
-
- --
ca
= 15%*(Paid up Capital)
-
Example -
~
Current bal
3
Current FY Losses = 10,000 , 000
200
-
=
157
2 -
main baln
1000000 x
Average Dividend rate for last 3 financial year = 6%
: .
5%
- =
X 4. 40000
=
4%
->
-
I
Sol – 1. Maximum Rate of Dividend = Average dividend rate of last 3 financial year = 6% 60000 =
= 10%*(12,00,000)
= 120,000
3. Minimum balance required after withdrawal = 15%*Paid up Capital
1.Balance of Free Reserves = 200,000
2.Balance after withdrawal = 150,000 (15%*10,00,000)
Amount that can be withdrawn = 50,000
Hence as per point 2 & 3 the amount that can be withdrawn = 50,000
4. Amount that can be withdrawn = 50,000
(-) CY Losses = (10,000)
Dividend = 40,000 = 4% Dividend
Hence as per combined interpretation maximum rate of dividend = 4%
Hence the company should be restricted to 4% and cannot declare 5% dividend