Going through the Financial Statements Interpretation – Corporate and Management Accounting CS Executive MCQ Questions with Answers you can quickly revise the concepts.
Financial Statements Interpretation – Corporate and Management Accounting MCQs
Question 1.
Which of these is not a function of Financial Accounting
(A) To provide financial information to the users of the financial statements.
(B) To portray gloomy picture of the business in order to evade tax liabilities.
(C) To keep a systematic record of business transactions.
(D) To depict a true and fair view of the financial position of the business.
Answer:
(B) To portray gloomy picture of the business in order to evade tax liabilities.
Question 2.
Provisions of the Corporate Social Responsibility (CSR) are applicable to the company having net profit of -…………..
(A) ₹ 100 Crore or more
(B) ₹ 75 Crore or more
(C) ₹ 50 Crore or more
(D) ₹ 5 Crore or more
Answer:
(D) ₹ 5 Crore or more
Question 3.
As per the provisions of the Companies Act, 2013, companies must maintain their accounts under -…………..
(A) Double account system
(B) Single entry system
(C) Double entry system
(D) Duplicate account system
Answer:
(C) Double entry system
Question 4.
Purposes of financial statements include all the following except -…………..
(A) Interpret and record the effects of business transaction
(B) Classify the effects of transactions to facilitate the preparation of reports
(C) Summarize and communicate information to decision makers
(D) Dictate the specific types of business enterprise transactions that the enterprises may engage in.
Answer:
(D) Dictate the specific types of business enterprise transactions that the enterprises may engage in.
Question 5.
Which of the following is characteristic of accounting information
P. Relevance
Q. Reliability
R. Comparability
Select the correct answer from the options given below -…………..
(A) P
(B) Q
(C) R
(D) All of the above
Answer:
(D) All of the above
Question 6.
Accounting policies followed by organizations -…………..
(A) Can be changed every year.
(B) Should be consistently followed from year to year
(C) Can be changed after 5 years
(D) None of the above
Answer:
(B) Should be consistently followed from year to year
Question 7.
Which of the following is statutory book
(A) Share call book
(B) Register of charges
(C) Register of probates
(D) Register of sealed documents
Answer:
(B) Register of charges
Question 8.
It is essential to standardize the accounting principles and policies in order to ensure -…………..
(A) Transparency
(B) Profitability
(C) Reputation
(D) All of the above
Answer:
(A) Transparency
Question 9.
Keeping of statutory books is -…………..
(A) Optional
(B) Compulsory
(C) Recommended
(D) None of the above
Answer:
(B) Compulsory
Question 10.
The determination of the amount of bad debts is an accounting –
(A) Policy
(B) Estimate
(C) Parameter
(D) None of the above
Answer:
(B) Estimate
Question 11.
CSR stands for
(A) Company Social Responsibility
(B) Corporate Social Rights
(C) Corporate Social Responsibility
(D) Company Social Rights
Answer:
(B) Corporate Social Rights
Question 12.
………… shall mean any amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets, or retained by way of providing for any known liability of which the amount cannot be determined with substantial accuracy.
(A) Provision
(B) Reserves
(C) Appropriation
(D) Transfer
Answer:
(A) Provision
Question 13.
If rights and beneficial interest in a property is transferred but documentation and legal formalities are pending then seller & purchaser should record in their accounts as sale & purchase. Which principle is applied here
(A) Prudence
(B) Substance over from
(C) Materiality
(D) All of the above
Answer:
(B) Substance over from
Question 14.
Which of the following is capital reserve
(A) Profit prior to incorporation
(B) Profits on sale of fixed assets
(C) Profits on reissue of forfeited shares
(D) All of the above
Answer:
(D) All of the above
Question 15.
Provisions for doubtful debts, provision for discount on debtors are based on –
(A) Prudence
(B) Substance over from
(C) Materiality
(D) All of the above
Answer:
(A) Prudence
Question 16.
As per Schedule III of the Companies Act, 2013, long term provisions are shown –
(A) By way of deduction from respective non-current asset
(B) As a part of shareholders funds
(C) Under the heading Non-Current Liabilities
(D) Under the separate heading Provisions
Answer:
(C) Under the heading Non-Current Liabilities
Question 17.
A possible future liability, which depends on the happenings of certain uncertain event, is called:
(A) Not a liability at all
(B) Contingent liability
(C) Future liability
(D) Deferred liability
Answer:
(B) Contingent liability
Question 18.
Under statement of closing stock of work-in-progress in the period will -………..
(A) Understate cost of goods manufactured in that period
(B) Overstate current assets
(C) Overstate gross profit from sales in that period
(D) Understate net income in that period
Answer:
(D) Understate net income in that period
Question 19.
Provisions are -………..
(A) Nominal accounts
(B) Personal accounts
(C) Real accounts
(D) Representative personal accounts
Answer:
(A) Nominal accounts
Question 20.
Which of the following is/are the essential features of accrual basis of accounting
(I) Revenue is recognized only when cash is received.
(II) Costs are matched against revenues on the basis of relevant time period to determine periodic income.
(III) Costs which are not charged to in-come are carried forward and are kept under continuous review.
(IV) Receipts or incomes are recorded as and when cash is received or becomes due on the other hand payments are recorded only when cash is actually paid.
The correct answer is –
(A) (I) & (IV) only
(B) (I), (III) & (IV) only
(C) (III) & (IV) only
(D) (II) & (III) only
Answer:
(D) (II) & (III) only
Question 21.
Net profit for the purpose of managerial remuneration has to be calculated as per
(A) Section 195
(B) Section 196
(C) Section 197
(D) Section 198
Answer:
(D) Section 198
Question 22.
The correct sequence in preparation of periodical financial statement would be –
1. Preparation of balance sheet
2. Preparation of cash flow statement
3. Preparation of trial balance
4. Preparation of Profit & Loss A/c
Select the correct answer from the options given below –
(A) 4, 2, 1, 3
(B) 3, 4, 1,2
(C) 2, 4, 3, 1
(D) 1,3, 2,4
Answer:
(B) 3, 4, 1,2
Question 23.
As per Section 198 of the Companies Act, 2013 while calculating net profit for managerial remuneration, if gross profit is starting point credit shall be given to:
(A) Subsidies received from Government
(B) Premium on shares or debentures
(C) Profits on forfeited shares
(D) Profits of a capital nature
Answer:
(A) Subsidies received from Government
Question 24.
If the Effective Capital of company is less than ₹ 5 Crores it may, without approval of Central Government, pay remuneration to the managerial person not exceeding:
(A) ₹ 30 lakhs per annum
(B) ₹ 60 lakhs per annum
(C) ₹ 50 lakhs per annum
(D) ₹ 90 lakhs per annum
Answer:
(B) ₹ 60 lakhs per annum
Question 25.
Unearned income is classified as –
(A) Fixed liability
(B) Fixed assets
(C) Current liability
(D) Current assets
Answer:
(D) Current assets
Question 26.
As per Section 198 of the Companies Act, 2013 while calculating net profit for managerial remuneration, if gross profit is starting point then which of the following is allowed to deducted –
(A) Loss of a capital natures
(B) Voluntarily compensation
(C) Directors seating fee
(D) Super-tax on the income
Answer:
(C) Directors seating fee
Question 27.
If Net Profit is starting point for the purpose of calculation of managerial remuneration then which of the following you will add:
(A) Ex-gratia payment to an employee
(B) Capital Profit
(C) Debenture trustee Remuneration
(D) Revenue profit on sale of plant
Answer:
(A) Ex-gratia payment to an employee
Question 28.
Which of the following are current assets of a business
(i) Income received in advance
(ii) Stock
(iii) Debtors
(iv) Pre-paid expenses
(v) Accrued income
Select the correct answer from the options given below –
(A) Both (i) and (iv) above
(B) Both (ii) and (iii) above
(C) (i), (ii) and (iii) above
(D) (ii), (iii), (iv) and (v) above
Answer:
(D) (ii), (iii), (iv) and (v) above
Question 29.
As per Section 198 of the Companies Act, 2013 while calculating net profit for managerial remuneration, if gross profit is starting point then which of the following is allowed to deducted –
(A) Contributions made u/s 181
(B) Actual bad debts written-off
(C) Liability arising from a breach of contract
(D) All of the above
Answer:
(D) All of the above
Question 30.
The arrangement of assets and liabilities in accordance with a particular order is known as of balance sheet.
(A) Tallying
(B) Marking
(C) Ruling
(D) Marshalling
Answer:
(D) Marshalling
Question 31.
If Net Profit is starting point for the purpose of calculation of managerial remuneration then which of the following you will deduct:
(A) Income Tax
(B) Capital Profits
(C) Compensation for breach of contract
(D) General expenses
Answer:
(B) Capital Profits
Question 32.
In ……………, approach assets which are to be used for long term in the business and are not meant to be sold are presented first and assets which are most liquid such as cash in hand, are presented at the bottom.
(A) Alphabetical order
(B) Permanence order
(C) Liquidity order
(D) None of the above
Answer:
(B) Permanence order
Question 33.
If the Effective Capital of company is ₹ 5 Crores and above but less than ₹ 100 Crores it may, without approval of Central Government, pay remuneration to the managerial person not exceeding:
(A) ₹ 7 lakhs per month
(B) ₹ 5 lakhs per month
(C) ₹ 4 lakhs per month
(D) ₹ 9 lakhs per month
Answer:
(A) ₹ 7 lakhs per month
Question 34.
In……………., approach the assets are stated in balance sheet in the order in which they can be easily converted into cash and the liabilities in the order in which they have to be paid off.
(A) Alphabetical order
(B) Permanence order
(C) Liquidity order
(D) None of the above
Answer:
(C) Liquidity order
Question 35.
If the Effective Capital of company is ₹ 100 Crores and above but less than ₹ 250 Crores it may, without approval of Central Government, pay remuneration to the managerial person not exceeding:
(A) ₹ 240 lakhs per annum
(B) ₹ 180 lakhs per annum
(C) ₹ 120 lakhs per annum
(D) ₹ 100 lakhs per annum
Answer:
(C) ₹ 120 lakhs per annum
Question 36.
Arrange the following assets as per liquidity order. L Cash & Bank II. Building IIL Investment IV. Stock Select the correct answer from the options given below –
(A) II, III, I, IV
(B) I, II, III, IV
(C) I, IV, III, II
(D) I,IV,II,III
Answer:
(C) I, IV, III, II
Question 37.
If the Effective Capital of company is ₹ 250 Crores and above it may, without approval of Central Government, pay remuneration to the managerial person not exceeding:
(A) ₹ 160 lakhs plus 0.05% of the effective capital in excess of ₹ 250 Crores
(B) ₹ 180 lakhs plus 0.25% of the effective capital in excess of ₹ 250 Crores
(C) ₹ 240 lakhs plus 0.02% of the effective capital in excess of ₹ 250 Crores
(D) ₹ 120 lakhs plus 0.01 % of the effective capital in excess of ₹ 250 Crores
Answer:
(D) ₹ 120 lakhs plus 0.01 % of the effective capital in excess of ₹ 250 Crores
Question 38.
Which of the following statement is true
(A) The amount reported on the balance sheet for property, plant and equipment is the estimate of the fair market value as of the balance sheet date.
(B) The third line of the balance sheet at the end of the year should begin with “for the year ended”.
(C) The total amount reported for owners equity is the approximate fair value or net worth of the corporation as of the balance sheet date.
(D) None of the above
Answer:
(D) None of the above
Question 39.
The annual instalment to depreciation fund for replacement of a fixed asset is –
(A) Charge against profit
(B) An appropriation of profits
(C) Charge against reserve
(D) Charge against cash
Answer:
(A) Charge against profit
Question 40.
Arrange the following assets as per permanence order.
I. Cash & Bank
II. Building
III. Investment
IV. Stock
Select the correct answer from the options given below –
(A) II, III, I, IV
(B) I, II, III, IV
(C) I, IV, III, II
(D) II, III, IV, I
Answer:
(D) II, III, IV, I
Question 41.
If the Effective Capital of company is negative and it passes special resolution then it may, without approval of Central Government, pay remuneration to the managerial person not exceeding:
(A) ₹ 60 lakhs per annum
(B) ₹ 120 lakhs per annum
(C) No remuneration since effective capital is negative
(D) ₹ 90 lakhs per annum
Answer:
(B) ₹ 120 lakhs per annum
Question 42.
…………… are those fixed assets which have a fixed content, like coal in a coal mine; the value of the asset goes down as the contents are taken out.
(A) Intangible Assets
(B) Fictitious Assets
(C) Wasting Assets
(D) Floating Assets
Answer:
(C) Wasting Assets
Question 43.
Depreciation is a process of -……………
(A) Valuation
(B) Allocation
(C) Reduction
(D) Appreciation
Answer:
(B) Allocation
Question 44.
…………. which can be immediately be converted into cash, such as Government Securities.
(A) Intangible Assets
(B) Fictitious Assets
(C) Wasting Assets
(D) Floating Assets
Answer:
(D) Floating Assets
Question 45.
Amortization applies to
(A) Current Assets
(B) Wasting Assets
(C) Intangible Assets
(D) Non-Current Assets
Answer:
(C) Intangible Assets
Question 46.
Which of the following statements is/ are NOT correct
(A) Provision for bad debts appears as a liability on the balance sheet
(B) The provision for bad debts is owed to the company
(C) Bad debts could be less than the provision for bad debts
(D) Bad debts could exceed the provision for bad debts
Answer:
(B) The provision for bad debts is owed to the company
Question 47.
Provisions of the Corporate Social Responsibility (CSR) are applicable to the company having turnover of –
(A) ₹ 100 Crore or more
(B) ₹ 250 Crore or more
(C) ₹ 500 Crore or more
(D) ₹ 1,000 Crore or more
Answer:
(D) ₹ 1,000 Crore or more
Question 48.
Which of the following is /are the important characteristic of depreciation
P. Depreciation is permanent, continuous and gradual increase in the value of a fixed asset.
Q. Depreciation is appropriation of profit.
R. Depreciation is always computed in a systematic and rational manner.
Select the correct answer from the options give below –
(A) Q & R only
(B) P & R only
(C) R only
(D) P & Q only
Answer:
(C) R only
Question 49.
The balance sheet gives information regarding the –
(A) Results of operations for a particular period
(B) Financial position during a particular period
(C) Profit earning capacity for a particular period
(D) Financial position as on a particular date
Answer:
(D) Financial position as on a particular date
Question 50.
Obsolescence of a depreciable asset may be caused by –
(I) Technological changes.
(II) Improvement in production method.
(III) Change in market demand for the product or service output.
(IV) Legal or other restrictions.
The correct option is –
(A) Only (I) above
(B) Both (I) & (II) above
(C) All (I), (II), (III) & (IV) above
(D) Only (IV) above
Answer:
(C) All (I), (II), (III) & (IV) above
Question 51.
Computers taken on hire by a business for a period of twelve months should be classified as –
(A) Current assets
(B) Intangible assets
(C) Deferred revenue expenditure
(D) Not an asset
Answer:
(D) Not an asset
Question 52.
In the case of downward revaluation of an asset which is for the first time, the account to be debited is
(A) Fixed Asset A/c
(B) Revaluation Reserve A/c
(C) Profit & Loss A/c
(D) General Reserve A/c
Answer:
(D) General Reserve A/c
Question 53.
Which of the following expenses is NOT included in the acquisition cost of a plant and equipment
(A) Cost of site preparation
(B) Delivery and handling charges
(C) Installation costs
(D) Financing costs incurred subsequent to the period after plant and equipment is put to use.
Answer:
(C) Installation costs
Question 54.
Tick the correct match.
1 Current Asset 1 Depreciation
2 Nominal A/c 2 Land
3 Non-Deprecia- 3 Insurance A/c
ble Asset
4 Non-Cash 4 Prepaid Rent
Expense A/c
Select the correct answer from the options given below –
(A) (1,2), (2, 3), (3, 4), (4,1)
(B) (1, 3), (2, 1), (3, 4), (4, 2)
(C) (1, 4), (2, 2), (3, 1), (4, 3)
(D) (1,4), (2, 3), (3, 2), (4,1)
Answer:
(D) (1,4), (2, 3), (3, 2), (4,1)
Question 55.
The most compelling reason for accounting for depreciation is:
(A) To match a portion of the depreciable cost of the asset against the income generated by it.
(B) To build up resources for the purpose of replacing the non-current assets.
(C) Because that is a requirement of company law.
(D) To write down the non-current assets to what it is worth by the end of the period.
Answer:
(A) To match a portion of the depreciable cost of the asset against the income generated by it.
Question 56.
Revenues affect net income -……………
(A) In the period during which they are earned
(B) In the period when they are collected
(C) In the period when they are accounted for
(D) Any of the above three which occur first
Answer:
(A) In the period during which they are earned
Question 57.
What do you understand when one refers to as “net book value” of a non-current asset -……………
(A) The cost of the asset.
(B) The cost of the asset less amount expensed as depreciation in the current period.
(C) The cost less accumulated depreciation up to the date of reporting.
(D) The current worth of the asset.
Answer:
(C) The cost less accumulated depreciation up to the date of reporting.
Question 58.
Choose the true statement.
(A) Accrued incomes represent income unearned but realized in cash.
(B) Accrued incomes represent income earned but not realized in cash.
(C) Accrued income A/c is shown on the liability side.
(D) No tax is payable on accrued income
Answer:
(B) Accrued incomes represent income earned but not realized in cash.
Question 59.
Depreciation fund method is also known as -……………
(A) Redemption fund method
(B) Amortization fund method
(C) Sinking fund method
(D) All of the above
Answer:
(D) All of the above
Question 60.
According to AS-6 “Depreciation Accounting”, issued by the ICAI change in method is permitted –
(A) Prospectively
(B) Retrospectively
(C) Negatively
(D) None of the above
Answer:
(B) Retrospectively
Question 61.
In case of companies depreciation on assets are provided on the basis of -……
(A) Life of the asset as given in Schedule IV
(B) Rate of depreciation as given in Schedule III
(C) Life of the asset as given in Schedule II
(D) Rate of depreciation as given in Schedule V
Answer:
(C) Life of the asset as given in Schedule II
Question 62.
Every company fulfilling specified criteria shall constitute Corporate Social Responsibility (CSR) Committee of the Board consisting of:
(A) 5 or more directors, out of which at least 2 directors shall be an independent director
(B) 10 or more directors, out of which at least 3 directors shall be an independent director
(C) 5 or more directors, out of which at least 1 director shall be an independent director
(D) 3 or more directors, out of which at least 1 director shall be an independent director
Answer:
(D) 3 or more directors, out of which at least 1 director shall be an independent director
Question 63.
Provisions of the Corporate Social Responsibility (CSR) are applicable to the company having net worth of –
(A) ₹ 100 Crore or more
(B) ₹ 250 Crore or more
(C) ₹ 500 Crore or more
(D) ₹ 1,000 Crore or more
Answer:
(C) ₹ 500 Crore or more
Question 64.
The Board of every company shall ensure that the company spends, in every financial year, at least of the company made during the …………… in pursuance of its CSR Policy.
(A) 2% of the average net profits; 3 immediately preceding financial years
(B) 5% of the average net profits; 5 immediately preceding financial years
(C) 5% of the average net profits; 3 immediately preceding financial years
(D) 2% of the average net profits; 5 immediately preceding financial years
Answer:
(A) 2% of the average net profits; 3 immediately preceding financial years
Question 65.
Computation of net profit for Section 135 is as per Section 198 of the Companies Act, 2013 which is primarily:
(A) Profit After Tax (PAT)
(B) Earnings Before Interest & Tax (EBIT)
(C) Profit Before Tax (PBT)
(D) Net Operating Profit After Tax (NOPAT)
Answer:
(C) Profit Before Tax (PBT)
Question 66.
Net profit after tax of XYZ Ltd. is ₹ 1,00,000 after debiting provisions for tax ₹ 40,000 and Managing Director’s Salary 60,000. Maximum remuneration payable to Managing Director as per provisions of the Companies Act, 2013 without complying provisions of the Schedule V is –
(A) ₹ 14,000
(B) ₹ 8,000
(C) ₹ 10,000
(D) ₹ 12,000
Answer:
(C) ₹ 10,000
Question 67.
Net profit after tax of PQR Ltd. is ₹ 15,48,000. This net profit is arrived after debiting P & L A/c following items:
Income Tax: ₹ 3,20,000;
Ex-gratia payment to employee: ₹ 50,000
Following items are credited to P & L A/c before arriving above net probt:
Capital Probt: ₹ 75,000
Probt on forfeiture of shares: ₹ 4,300
Maximum remuneration payable to Managing Director as per provisions of the Companies Act, 2013 without complying provisions of the Schedule V is -……………
(A) ₹ 91,935
(B) ₹ 95,685
(C) ₹ 90,425
(D) ₹ 94,750
Answer:
(A) ₹ 91,935
Question 68.
Gross probt of AG Ltd. is ₹ 20,78,000 before considering following items:
Revenue profit on sale of plant — 1,40,000
Subsidy from Central Govt. –7,30,000
Capital profit on sale of plant — 1,30,000
Interest on Investment — 60,000
Depreciation as per Schedule II — 3,00,000
Maximum remuneration payable to MD without complying provisions of the Schedule V is –
(A) ₹ 1,23,700
(B) ₹ 1,35,400
(C) ₹ 1,53,200
(D) ₹ 1,46,300
Answer:
(B) ₹ 1,35,400
Question 69.
Net profits before charging the commission – ₹ 80,000. Following had been charged off against the probts as determined as above:
- Depreciation ₹ 31,900
- Provision for bad debts ₹ 920.
Other relevant information:
- Actual bad debts ₹ 800.
- Depreciation as per Schedule ₹ 39,160.
Maximum remuneration payable to MD without complying provisions of the Schedule V is –
(A) ₹ 3,643
(B) ₹ 5,728
(C) ₹ 4,762
(D) ₹ 1,874
Answer:
(A) ₹ 3,643
Question 70.
Manager of Z Ltd. is entitled to a commission @ 3% on net probt after charging such commission. Calculate the commission payable to the manager.
Net probt before tax and managerial remuneration = ₹ 8,80,000
Depreciation as provided in books of account = ₹ 1,10,000
Depreciation as per the Companies Act, 2013 = ₹ 1,32,000
(A) ₹ 25,740
(B) ₹ 24,990
(C) ₹ 42,900
(D) ₹ 23,330
Answer:
(B) ₹ 24,990
Question 71.
Gross probt of G Ltd. is ₹ 40,38,000 before considering following items:
Salaries & Bonus — 1,80,000
Repairs to Buildings — 90,000
R & D Expenses — 15,000
Directors Fees — 6,000
Managing Director’s Salary — 36,000
Interest on Debentures — 20,000
Probt on sale of plant — 1,20,000
Subsidy from Central Govt. — 2,19,000
Whole of the R & D expenses has been incurred for purchase of equipment. On Plant depreciation provided up to date was ₹ 42,000. Maximum remuneration payable to MD without complying provisions of the Schedule V is –
(A) ₹ 2,22,440
(B) ₹ 2,12,320
(C) ₹ 2,48,650
(D) ₹ 2,00,150
Answer:
(D) ₹ 2,00,150
Note: Profit to the extent of accumulated depreciation is revenue profit.
Maximum remuneration to MD = 40,03,000 × 5% 2,00,150
Question 72.
Profits of Q Ltd. before remuneration of MD was 12,06,000 for the year ended 31st March 2020. The said profit has been calculated considering following figures:
Capital expenditure — 4,95,000
Depreciation as per Schedule II — 42,000
Bonus to technicians — 1,89,000
Compensation paid to workmen — 42,000
Loss on sale of fixed assets — 42,000
Subsidy from Govt. — 2,52,000
Multiple shift allowance — 63,000
Provision for taxation — 16,80,000
Ex-gratia payments to workers — 21,000
Profit on sale of building — 1,26,000
Determine the maximum remuneration payable to the MD of Z Ltd. from the above information.
(A) ₹ 1,76,800
(B) ₹ 1,56,600
(C) ₹ 1,65,900
(D) ₹ 1,68,800
Answer:
(C) ₹ 1,65,900
Question 73.
Z Ltd. employs a Manager who is entitled to a salary of ₹ 8,000 per month and, in addition, to a commission of 2% on the net profits determined before charging such salary and commission.
Depreciation shown above is as per Schedule II of the Companies Act, 2013.
Maximum Remuneration payable to Manager without complying provisions of Schedule V is —
(A) ₹ 1,32,640
(B) ₹ 78,900
(C) ₹ 1,23,720
(D) ₹ 79,800
Answer:
(B) ₹ 78,900
Question 74.
Following is the information in respect of two companies:
Compute the amount the companies are required to spend on account of Corporate Social Responsibility (CSR):
Answer:
(D)
(1) XYZ Ltd.: Since XYZ Ltd. has yet to complete its first three years after incorporation. it is not required to spend anything on CSR activity.
(2) CBA Private Ltd.: Average net profit of the company is 1,00,00,000. Thus, company has to spend 2,00,000 on CSR activities.
Question 75.
Z Ltd. having 2 whole-time director on its board and 3 part-time directors, earned profits during the year ended 313.2019 to the tune of 2,50,000 after taking into consideration the following
Depreciation on fixed assets ₹ 92,244.
(i) Depreciation calculated in accordance with Section 123 is ₹ 32,800.
(ii) Provision for income-tax ₹ 1,22,500.
(iii) Capital expense charged to profit and loss account ₹ 12,500.
Calculate maximum remuneration payable to whole time directors assuming that the remuneration payable to them is to be calculated on net profit remaining after payment of commission to part-time directors which is to be calculated on net profits remaining after payment of remuneration to the whole-time directors.
(a) Remuneration to Part-time director = ?
(b) Remuneration to Whole-time directors = ?
Answer:
(a)
Question 76.
Following are the particulars of a Limited Company:
| Net profit before provision for income tax and managerial remuneration, but after depreciation and provision for repairs | 86,84,100 |
| Depreciation provided in the books | 32,00,000 |
| Repairs of machinery provided for during the year | 2,50,000 |
| Actual expenditure incurred on repairs during the year | L50,000 |
Calculate the maximum remuneration payable to –
(i) Managing Director and
(ii) other part-time directors of the company.
Answer:
(C)
Remuneration payable as per Section 197 of the Companies Act, 2013:
- Managing director. 87,84,100 × 5% = 4,39,205
- Other part-time directors: 87,84,100 × 1% 87,841
Note: It is assumed that depreciation is provided as per Schedule II.
Question 77.
P & L A/c of JF Ltd. is given below:
Original cost of the machinery sold was ₹ 40,000. WDV of the machinery sold is ₹ 30,000. Depreciation per Schedule II is ₹ 3,42,000. Compensation was paid for breach of contract. Profit as per Section 198 = ?
(A) ₹ 16,45,800
(B) ₹ 19,89,000
(C) ₹17,39,000
(D) ₹ 15,48,200
Answer:
(A) ₹ 16,45,800
- Revenue profit (to the extent accumulated depreciation) – 10,000
- Capita profit (Excess.proflt over accumulated depreciation) – 15,000
Question 78.
Details of GH Ltd. are given below: ?
Gross profit — 40,00,000
Profit on sale of machinery — 4,50,000
Subsidy from the Government — 1,00,000
Salaries and wages — 1,50,000
Repairs to fixed assets — 50,000
General expenses — 40,000
Compensation for breach of contract — 25,000
Depreciation — 2,40,000
Loss on sale of investment — 35,000
Expenditure on scientific research — 2,50,000
Debenture interest — 75,000
Interest on unsecured loans — 15,000
Provisions for income tax — 16,00,000
Proposed dividends — 10,00,000
Net profit — 10,70,000
Cost of Machinery was ₹ 8,00,000 and written down value is ₹ 4,00,000. Expenditure on scientific research was made for setting-up a new laboratory. Calculate the overall managerial remuneration.
(A) ₹ 1,95,230
(B) ₹ 4,29,550
(C) ₹ 3,40,840
(D) ₹ 1,86,690
Answer:
(B) ₹ 4,29,550
Loss on sale of investment will not allowed to be deducted as it is loss of capital nature.
Expenditure on scientific research is capital expenditure hence will not be allowed.
Provisions /or income tax & proposed dividends are nota llowabk as perSection 198
Overall Managerial Remuneration 39,05,000 × 1 1% = 4,29,550
Question 79.
Net profit of CJW Ltd. is ₹ 20,00,000. after considering the following:
Depreciation — 4,00,000
Preliminary expenses — 1,00,000
Provision for tax — 31,00,000
Director’s fee — 80,000
Bonus — 1,50,000
Profit on sale of fixed assets — 1,55,000
Provision for doubtful debts — 90,000
Scientific research — 2,00,000
MD’s remuneration — 3,00,000
Fixed assets details.’Original cost ₹ 2,00,000; WDV X 1,10,000
Expenditure on scientific research was made for setting-up a new laboratory.
Maximum remuneration payable to part time directors = ?
(A) ₹ 58,450
(B) ₹ 62,850
(C) ₹ 54,150
(D) ₹ 57,750
Answer:
(D) ₹ 57,750
Question 80.
Chief accountant of X Ltd. gives the following data regarding six segments:
Reportable segments are –
(A) O, P & R
(B) M, N & O
(C) M, O, Q & R
(D) All the segments are reportable segments
Answer:
(D) All the segments are reportable segments
