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QUESTION 1

 

ABC PRIVATE LIMITED
PROFIT AND LOSS A/c  
Particulars Amt
Sales 500000
Less  
Purchase 300000
Gp 200000
Less  
Office Exp. 60000
Intrerest 50000
Depreciation* 60000
Profit  30000
Tax @ 30% ?
Profit after tax ?

Calculate Tax and PAT

-a-

Profit before tax=30000

Tax =30% of Profit =30%*30000=9000

Profit after tax=30000-9000=21000

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Example 2

Suppose Depreciation charged in books is as per Companies Act is 60000

But Depreciation as per Income Tax Act 70000

Calculate Tax?

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DIRECT  METHOD

Particulars Amt
Sales 500000
Less  
Purchase 300000
Gp 200000
Less  
Office Exp. 60000
Intrerest 50000
Depreciation 70000
Taxable Profit 20000
Tax 30% 6000

INDIRECT  METHOD

Particulars Amt
Indirect method  
Net Profit 30000
Add:  
Exp. Disallowed  
Dep As Per Companies Act 60000
Less:  
Exp. Allowed  
Dep As Per Income Tax Act 70000
Taxable Profit 20000
Tax 30% 6000

Normally in Companies,Indirect Method is more followed

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Calculate PBT and PAT also in above case

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Particulars Amt
PBT (Profit before tax) 30000
Tax @ 30% 6000
Profit after tax 24000

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QUESTION

Is Depreciation shown In Tally Profit and Loss as per Companies Act or Income Tax Act?

-a-

In case of Non Company,

Depreciation shown is as per Income Tax Act (as Companies Act is not applicable)

(Refer Q1 above) 

In case of Company,

We pass Entry of Depreciation as per Companies Act

Hence,In our Profit and Loss Account,Depreciation as per Companies Act is shown

However while paying taxes,we have to use Depreciation as per Income Tax Act

(Refer Q2 above)

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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 7 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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