How to Calculate Net Profit for Managerial Remuneration, A special article on How to Calculate Net Profit for Managerial Remuneration and CSR.profit under section 198, In this article you can find complete details for the calculation of net profit for managerial remuneration and CSR. Must Check Petty Cash Book.
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How to Calculate Net Profit for Managerial Remuneration
As per the Companies Act the net profit we arrive at in financial statements says statement of financial performance (PandL 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 the Calculation of net profit for managerial remuneration.
| Profit before tax as per PandL Statement | xxxxxxx |
| Add the following items if debited to PandL Statement before arriving profit before tax | xxxx |
| Managerial remuneration | xxxx |
| Provision for Bad 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 are 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 |
| The lease premium was written off | xxxx |
| Provision for warranty spares/supplies | xxxx |
| Infructuous project expenses are 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 PandL statement for arriving at a profit before tax: | xxxx |
| Capital profit on sale/disposal of fixed assets(the same should be added if the co., or business compromises on buying and selling any such property or asset) and revenue profit (difference between the original cost and WDV should not be deducted) | xxxx |
| Profit on sale of any undertaking or its part | xxxx |
| Profit on buyback 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 and 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 the maximum allowable remuneration then we can the permission of the Central Government should be obtained. You may also like Rules of Debit and Credit.
