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Profit & Loss Analysis for Papita and Babita

The document presents the profit and loss accounts for Papita and Babita for the year ended 31/3/2022, detailing their revenues, expenses, and net profits. It includes adjustments for overvalued stocks, interest payments, and depreciation, leading to the computation of tax liabilities. The final calculations show Papita's net profit as Rs. 71,29,550 and Babita's income from PGBP as Rs. 4,35,633, with Babita being covered under Section 44AD for taxation.

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anprisingh
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117 views10 pages

Profit & Loss Analysis for Papita and Babita

The document presents the profit and loss accounts for Papita and Babita for the year ended 31/3/2022, detailing their revenues, expenses, and net profits. It includes adjustments for overvalued stocks, interest payments, and depreciation, leading to the computation of tax liabilities. The final calculations show Papita's net profit as Rs. 71,29,550 and Babita's income from PGBP as Rs. 4,35,633, with Babita being covered under Section 44AD for taxation.

Uploaded by

anprisingh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd

Qno 4 - Following is Papita’s Profit & loss account for year ended 31/3/2022

Particular Amount Particular Amount

Openings Stock 19,18,500.00 Sales 3,15,40,700.00

Purchases 2,18,00,400.00 closing stock 22,00,950.00

Direct Expenses 4,15,600.00

To GROSS PROFIT 96,07,150.00

Total 3,37,41,650.00 3,37,41,650.00

To Salaries & wages 17,12,400.00 By GROSS PROFIT 96,07,150.00

To General Expenses 2,82,600.00 By Income Tax Refund 16,000.00


To Income Tax for FY 20-
21 2,82,400.00 By Interest on F D 95,000.00

To Bank Interest 1,20,000.00 (Net of Taxes)

To Insurance Premium 88,000.00 By Dividend (Gross Amt) 1,10,400.00


By Short Term Capital
To Depreciation 1,82,000.00 Gain 22,000.00

To Rates & Taxes 42,600.00


To Donation to Charitable
Trust 11,000.00

To Net Profit 71,29,550.00

Total 98,50,550.00 98,50,550.00

Papita provides the following additional information:-

1) Closing is overvalued by Rs. 38,000.


2) Income Tax refund includes Rs. 2,500 towards interest.
3) Depreciation as per Income Tax provision is Rs. 2,10,400.
4) General Expenses include Papita’s contribution to PPF of Rs.1,00,000.
5) Salaries includes 28,000 paid in cash on a single day to an employee.
6) Insurance Premium includes 6500 paid in cash for employees health.

[Link] Swapnil Patni Classes 1


7) Interest is paid on bank loan of 10,00,000 out of which 2,00,000 is used for personal
purpose. Compute –Tax Liability.

[Link] Swapnil Patni Classes 2


Q no 5 – following is Babita ‘s profit & loss account for the year ended 31.3.2022

Particulars Amount Particulars Amount


To opening Stock 85,400 By sales 11,12,14,600
To Purchases 1,05,00,400 By Closing stock 1,87,,400
To Gross Profit 8,16,200

To Salary 80,000 By Gross Profit 8,16,200


To Rent & rates 44,000 By Income from UTI 4,500
To Interest on Loan 96,000
To Depreciation 75,400
To Printing & Stationery 36,200
To General Expenses 23,600
To Bad debts 6,100

To interest on Bank Loan 40,000


(Machinery)
To Net Profit 4,19,400
TOTAL 8,20,700 8,20,700

Adujstment :-

1) Depreciation as per Income Tax 90,000


2) Interest on loan includes 5000 paid on proprietors capital also Interest on machinery
loan 15,000 paid till the date asset is put to use
3) Printing & Stationery contend payment to relative unreasonable 4000
4) Opening & Closing Stock undervalued by 10%
5) Rent and rates includes payment in cash Rs. 10,000
Calculation of Income from PGBP

ANSWER NO -5

Particulars Amount Rs Amount Rs


Net profit as per Profit & loss A/C 4,19,400
Add: - 1.) undervaluation of Closing 20,822
Stock
2) Interest on Propritors Capital 5,000
3) Printing & Stationery paid to 4,000
relative unreasonable
4) Interest on Machinery loan not 15,000 44,822
allowable
4,64,222
Less :- 1) Depreciation 14,600
2) Undervaluation of Opening Stock 9,489
3) income from UTI 4,500 28,589
Income from PGBP 4,35,633

AS Sales is Rs. 1,12,14,600 which is less than 2 crores , Assessee is covered under Section
44AD.

Profit under Section 44AD = 8% OF 1,12,14,600= 8,97,168

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