How to Calculate Net Profit for Managerial Remuneration, An special article on How to Calculate Net Profit for Managerial Remuneration & CSR.profit under section 198, In this article you can find complete details for calculation of net profit for managerial remuneration and CSR. Recently we provide complete details for Accounting concepts – A comprehensive discussion. Now you can scroll down below and check complete details regarding “How to Calculate Net Profit for Managerial Remuneration”
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How to Calculate Net Profit for Managerial Remuneration
As per companies act the net profit we arrive at in financial statements say statement of financial performance (P&L statement) should not be used for calculating the remuneration payable to directors. Now the companies act 2013 made it mandatory to consider the net profit calculated u/s 198 of the act for CSR also. Here I’m going to discuss some lines about Calculation of net profit for managerial remuneration.
| Profit before tax as per P&L Statement | xxxxxxx |
| Add the following items if debited to P&L Statement before arriving profit before tax | xxxx |
| Managerial remuneration | xxxx |
| Provision forBad doubtful debts | xxxx |
| Loss on sale/disposal/discarding of assets. | xxxx |
| Loss on sale of investments | xxxx |
| Provision for diminution in the value of investments | xxxx |
| fixed assets written off | xxxx |
| Fall in the value of foreign currency monetary assets | xxxx |
| Loss on cancellation of foreign exchange contracts | xxxx |
| Write off of investments | |
| Provision for contingencies and unascertained liabilities | xxxx |
| Lease premium written off | xxxx |
| Provision for warranty spares/supplies | xxxx |
| Infructuous project expenses written off | xxxx |
| Provision for anticipated loss in case of contracts | xxxx |
| Loss on sale of undertaking | xxxx |
| Provision for wealth tax | xxxx |
| compensation paid under VRS | xxxx |
| Less the following if credited to P&L statement for arriving at profit before tax: | xxxx |
| Capital profit on sale/disposal of fixed assets(the same should be added if the co., business comprimises of buying & selling any such property or asset) and revenue profit (difference between original cost and WDV should not be deducted) | xxxx |
| Profit on sale of any undertaking or its part | xxxx |
| Profit on buy back of shares | xxxx |
| Profit/discount on redemption of shares or debentures | xxxx |
| Profit on sale of investments | xxxx |
| Compensation received on non-compete agreements | xxxx |
| Write back of provision for doubtful debts | xxxx |
| Write back of provision for doubtful advances | xxxx |
| Appreciation in value of any investments | xxxx |
| Compensation received on surrender of tenancy rights | xxxx |
| Profit on sale of undertaking | xxxx |
| Write back of provision for diminution in the value of investments | xxxx |
| Profit on sale of forfeited shares & shares of subsidiary/associated companies | xxxx |
After calculating the profit as said above the limits specified in the act in respect of managerial remuneration can be applied to know the maximum allowable remuneration.
If the actual remuneration is more than maximum allowable remuneration then we can the permission of Central Government should be obtained.
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I have to decide the managerial remuneration for the Financial Year 2018-19, for which period net profits i will take as per section 198 of the Companies Act, 2013
Preliminary expenses* ko p&L se writte off kr diya jae to managrail remunaratin nikalne k liye ise vapas add kiya jaega ya nhi
how to calculate netprofit