Corporate Balance Sheet:

Rules for Transfer to reserve:

When proposed dividend is between 10% to 12.5% of paid up capital ,transfer to general reserve should be 2.5% When proposed dividend is greater than 12.5 % to 15 % of paid up capital ( >12.5% to 15%) ,transfer to general reserve should be 5% When proposed dividend is greater than 15 % to 20 % of paid up capital ( >15% to 20 %) ,transfer to general reserve should be 7.5% When proposed dividend is greater than o 20 % of paid up capital ( >20 %) ,transfer to general reserve should be 10% .

DIVIDEND DISTRIBUTION TAX

Dividend distributed by an Indian Company is exempt from income-tax in the hands of many shareholders. The Indian Company is liable to pay Dividend Distribution Tax (DDT) @ 16.995 percent (i.e. inclusive of surcharge and education cess) on such dividends

Example 1 :

The following is the trial balance of Lakshami Co. Ltd as at 31st March, 2001.

Particulars

Debit ( ` 000

Credi t ` 000

Stock as on 1st April ,2000

7500 0

Purchase return Purchase & sales Wages Discount Carriage Inward Furniture Salaries Rent Sundry Debtors Profit & Loss Account 31-3-2000 Dividend Paid for 1999-2000 Corporate Dividend Tax paid @11.7% Share Capital Debtors & Creditors Plant & Machinery Cash at Bank General Reserve Patents Bills Total 4800 5000 509053 2750 0 2900 0 4620 0 9000 1053 950 1700 0 7500 4000 7050 245000 3000 0

1000 0 340000

3000

1605 3

100000 1750 0

1550 0

7000 509053

Adjustments:

Stock on 31st March ,2001 was valued at ` 8,80,00,000 Make provision for income tax @35% Depreciate Machinery @15 %,Furniture @10% & Patents @5%
On 31st March ,2011 outstanding rent was ` 800,000 900,000. while outstanding salary was `

Board of director have proposed dividend @ 15 % p.a. for year ended 31 st March ,2001 after minimum transfer of general reserve . Rate of DDT is 11.7% Make provision for doubtful debt amounting to ` 510,000 Provide managerial remuneration @10 % of the net profit before tax & before deducting managerial remuneration.