PROFITS AND GAINS OF BUSINESS OR PROFESSIONa NUMERICAL QUESTIONS ly Mr. N prepared the following profit & loss account of his cloth shop for the year ended 31st hy March, 2019. Find out his income from the business for the Assessment Year 2019-20 : be % ) Profit & Loss Account (for the year ended 31st March, 2019) a = Salaries and Wages 33,000 — Gross Profit 3,34,725 © Rent, etc. 1,600 Gifts received from relatives — 275 Household expenses ~ 82,000 Income tax = ‘900 Advertisement 800 Postage expenses 600 Gifts to relatives — 900 Fire Insurance Premium 400 Life Insurance Premium — 2,100 Bad Debts Reserve — 800 Audit Fees 400 Net Profit transferred to Capital Ale 2,11,500 3,35,000 (7a) Ws below is the Profit and Loss Account of a Timber Merchant for the year ended 31st Ans. Taxable Income from Business ¥ 2,97,925. fj March, 2019: ) 4 : : 7) Openii 25,000 Sales 6,00.000 Purine al 2,50,000 Rent of Property ~ 15,000 Wages 1,00,000 Closing Stock 35,000. Audit fees 1,000 Repairs (House Property) ~ 2,000 General Charges 1,500 Gommission for raising Loan 1,000 Bad Debts Reserve — 500 Bad Debts Interest on Capital ~ Contribution to Staff Welfare Fund Tovision for Income tax — Depreciation (Allowable) 2,500 et Profit 2,50,000 650,000, 6,50.000Nation OF AED Te es MUP 2,50,000 of which 400 bags were sold for $ ation by the L:T.O. it was revealed the 100. Compensation for termn ags of wheat were purchased for expenses were & 26,500. On an exam cis were included in shop expenses = Fz 4,500 on the marriage of Rajendra Kumar's son. 1g the cost of calendars and diaries. xg repairs of a residential house. ent expenses & 2,450. - (00 imposed for bringing goods without paying custom. of 2,500 in connection with the purchase of a typewriter. able Income from Business and Profession for the Assessment Year 2019.29, us. Income ¥ 2,14,100. oe (73) ‘and P. & L. Account of Mr, Harish, calculate his income from Business ‘Trading nent Year 2019-20 : . z z 1,00,000 Gross Profit 5,962) 45,500 Rent on Property ~ 48,000 8 92,500 Refund of Income tax ~ 3,000 . (Goods) 8,600 Bad Debts Recovery 7300 ‘Premium (H.P)~ 3,400 Premium — 30,000 4 809 n Motor 18,000 6000 fed t 7 1,000 yt at Exp. 18,500 Dos7 dep] vy — 21,000 Fach er 3,04,060 655,060 ion : r includes : (i) Goods presented to customers (30 articl includes +) ¢ to cust cles @ % 800 each); (ii) TV. \omers (vo TV. @ 4,500 per set (ii) Diaies/Calendars® 3,000; (iv) Balance amount to one employee. ‘ Bad Debts jncludes ¥ 6,000 which was not a t accept i Taccepted meang tax alcody callected, rome bao. Regu or #8 T 1,00,000 on Which depreciation allowed @ 15% p.a. Ja 2 Dal Mill. His Profit & Loss Account (2018-19) is as under : EB : zt 28,000 Sales of Pulses 00 n $40,000 Sales of Husk 1 3p00 ,000 Closing Stock "24,000 1,44,000 ae 5,84,000 584000 i “7,000 Gross Profit b/d 7,44,000 13,200 Profit from Wheat Business 47,500terest ses. ire Expenses n 1,50,400 218,000 formations are available ii '% 18,000 was purchased on 28th March, 2019. This amount is included in , but not included in stock. Its delivery received on 2nd April, 2019. penses include % 2,000 for expenditure on Deepawali. g is a manager himself and received a salary. He gives full time to factory. 2,18,000 ‘the factory were as follows : z y Building 1,50,000 nery (1.4.2018) 2,00,000 tion on above assets is not charged in P & L A/c. ation paid for breach of contract. ible income from the business of Shri Garg for the Assessment Year 2019-20. (7.5) 00. A/c of a trader shows Net Profit of € 3,38,000 after debiting the following items. me from the business for the Assessment Year 2019-20 : of income tax % 7,000 and income tax proceedings expenses % 11,000. on loan is taken for payment of income tax & 1,000. 800 and interest % 4,000 for delay payment of GST. » ment to a creditor 28,000. 1 Tax % 1,800. 1/8 portion of the house is used for business and half portion is self-residence and the remaining portion is let out. f 750 accrued during the previous year is not recorded in P & L A/c. profit includes 3,000 for recovery of old bad debts, which were disallowed by )fficer in the past. 76) 0. wing particulars compute the Business Income of Mr, Satyam : lars 9 z Particulars z Y\— 90,000 By Gross Profit 4,50,000 (Y\ 20,000 By Dividend .7 4,000 arges 4,000 By Bad debts recovered tha nses 5,000 (allowed earlier) 174m 4,400 rIncome-Tax\“ 6,000 _ By Interest on Post Office . on 12,000” Savings Bank \/ 1,200 mn the acquisition of : hts 7° 56,000 oni 42,000 on to RPF 12,000 4,500 y Cheque 2,500 2,05,600 4,59,600 459,600 gal expenses include % 2,000 incurred by the assessee for defending a criminal se against him. 2eyo Porsenrel , wot alowed + aiywed bur preciation of the year on the assets other than patent rights is * 16,900.E To Salaries 3,30,000 By Gross Profit — Aa ‘To Office expenses 36,000 Bi Bad debis a + ToD ati 28,000 By Dividends . : pest 18.000 By Rent from house property ~\__18,009 RAL. 4 To Legal expenses 16,000 —_ — “yen . L To Income tax ~ 14,000 J sw ; To Expenses on the acquisition of pw allowed tr patent rights Ys7+ 24,000 ares > aby ‘To Donation in Cash — 4,000 a Tet BNA. ‘To Repairs 12,000 Por oy To Provision for bad debts ~ 6,000 eor® ew) RAY 45,000 (He paid only % 20,000 before the due date of filing I.T. return.) out Plan a (7.12) Net profit as per Profit and Loss A/c (Before charging the fpllowins R, 1. Expenditure on Family planning AUpwea UTS 37 ‘ ) : 45,000 wed @ 7. “b> Ans. ? 4,16,500. > 2OyLo allo, The Net profit of Mr. Sulaiman as per his Profit and Loss Account after charging the following items was % 3,40,000 : 2 z (a) Interest on capital ~ Io 20,000 « (b) Salary to staff 1,16,000 (c) Office expenses %y ' 3,000 (d) Bad debis written-off 13,000 (c) Provisions for bad debts ~~ 10,000 () Provisions for income-tax —~ 16,000 (g) Donation — 10,000 (h) Depreciation 17,000 Depreciation allowable as per the Act is only % 12,000. (7.13) Compute income from the business. Ans. 7 4,01,000. Shri N. C. Sharma is a Chartered Accountant. He has prepared the following income and expenditure account for the year ended 31st March, 2019 : Income and Expenditure Account Expenditure z Income ig Office expenses 10,000 Audit fees 3,70,500 5,050 Employees’ Salary 5,000 — Gift from father-in-law8 INCOME TAX ee Books (other than annual Dividend publications) 5,500 Profit on Sale of Investments $0 Personal expenses 3,02,000 * Donation to N.D.F. 500 Interest 700 Income tax 13,300 Car expenses 2,000 Net Surplus 51,000 3,90,000, 3:90,005 i e is Professional income for the Assessment Year 2019.9, You are required to compute his Prof income forthe Assessment Yeo 20193 considering the following points : (a) The car is us and allowed dep. for official work is = 500. (b) & 1, employees’ Salary. (c) Loan has been taken for personal books @ 40% ae Ans. & 3,52,800. : 15. Ramakrishna is a Chartered Accountant. He has submitt diture Account for the year 2018-19. Compute his income 4, ment Year 2019-20 : Tose (000 domestic Servant Salary is included | purposes. (d) Allow depreciation yn ed the following Income and Expon, from the profession for the Assess. Expense: z Income z Jf Te Office Rent 33,000 By Audit fees ~~ 7 3,00,009 To Salary to Staff ~ 75,000 By Financial Consultancy Service ~ '60,099 % To Charities 5.000 By Interest on Deposits in a Bank 22,000 \ To Gifts to relatives 6.000 By Dividends on Units of UTI 6.009 UV ToSudseription for Journals“ 2,400 By Accountaney works.“ 32,000 4 To Drawings 5 16,000 } To Car expenses 76{+ 24,000 To Household expenses 8,600 To NSCs purchased 20,000 To Net Income 2,30,000 % 4,20,000 Additional information : 1. Office rent % 3,000 though paid is not recorded. 2. Depreciation of car during the year is % 6,000. 3. 30% of car expenses are related to personal purposes. 745) Ans. = 2,57,600. Smt. Jyoti is a registered medical practitioner. She keeps her books on a cash basis and for the year ended 31st March, 2019 her summarised Cash A/c is as under : &« z t & Opening Balance 2,700 Cost of Medicines ~ 20,000 Bank Loan : 6,000 Surgical Equipment 6,000 r\ Sale of Medicines a 30,500 — Motor-car 12,000 Consultation Fees 10,000 Car Expenses 1,800 Visiting Fees 8,000 Salary —~ 1,200 Interest on Investments 9,000 Rent of Dispensary 1200 Rent from Property 7,200 General Expenses ~ 600 Sale of Building 15,000 Personal Expenses 3,600 Sale of Furniture 5,000 Life Insurance Premium 2,000 Interest on Bank Loan — 360 Property Insurance 400 Fixed Deposit in Bank 30,000 Closing Balance 14.240 93,400 93.400 Keeping in view the following additional information, compute her income from the professi0® for the Previous Year 2018-19 : (a) 1/Srd car expenses are for personal use.FITS AND GAINS OF BUSINESS OR PROFES (b) Written-down value of vn th 8 7 he house property on Ist April, 2018 was % 20,000 and that of farnitur a Rate of depreciation oa pare were no other assets in these blocks. Ans. & 21,840. 'e car and surgical equipment is 15%. (7.18) Shri Somnath is a | 7 a Sy ee of Mumbai. He deposits in the Bank all the receipts and 31.3.2019 is as under" YY Cheaue. The analysis of his Bank Account for the year ended / alance b/ e = erate fees 58.340 Salaries ~ pene Reiaeea : 3,90,000 Rent of Chamber ~ 9,500 House Rent 7,160 Telephone Expenses “ 1,000 Income from Horse Race 22,500 Magazine Subscription Y 3,000 Gross € 15,000) Motor-car Expenses 28,000 eee 10,000 Mise. Office Expenses 5.500 Undivided Feml indu Purchase of Motor-car \5{ 2,00,000 ily 7,110 Advance Payment of Income tax & 40,000 Donation to Mumbai University * 10,000 Personal Expenses ! House Property Exps. : z Taxes 000 Repairs 00 Insurance 00 Collection Charges 000 10,000 Balance od 4,95, 11 Compute his gross total income after taking into account the following information : (a) 1/4th of the motor-car expenses relate to personal use. (b) Rate of depreciation on motor-car is 15%. (c) Shri Somnath stays in the house, the gross annual value of which is % 9,800. The following are the expenses which have been included in the above account in respect of, self-occupied house : Insurance premium % 500; Municipal Taxes % 2,400. a The balance of house property expenses are in respect of let out house. (7.17) ‘Ans. Gross Total Income 3,42,430; House Property % 13,930; Profession % 3,13,500; Other Sources 2 15,000. 18. Dr. Gupta is a medical practitioner of Ludhiana, From the following, calculate his income from the profession for the Assessment Year 2019-20 : z ~ Gross receipts from dispensary — Gross receipts from consultation . Operation fees . Visiting fees S Gifts from patients 6. Medicines purchased poy 097 allowed» 7. Closing stock of medicines 8. Salaries paid to employee’ Oh 9. Surgical equipment purchased | Xt : 10. Dr. Gupta went to attend a medical seminar in Gorsyany to update the knowledge and spent & 26,000 on it. 11. He owns a house whose municipal value is 50,000 Half portion of the house is used for the profession, Expense paid on the house ; M. Taxes 10% of M.V., Repairs @ 10,000, ol t 30,000 12. Medical books purchased (Allow depreciation @ 40%) 40} S aaa Ans. 2 438,300. s v 2 / Hint : Dividends from Indian Companies exempt. $ Xl x , 2follows : 4 z 7 Opening Balance 1,892 Fees Received 7 2,40,000 Salary asa part-time lecturer 21,600 Exam, Remuneration from University Interest on Bank deposit Shares sold coe Dividend Received f % 284,532 Additional information : INCOME TAX Mr. K. Bajaj lives in Bhopal. He is a lawyer and his Receipts and Payments Account ig ag Books Purchased Dey z (Annual Publications)” { 800 Repairs of House) 1,209, Local taxes @ 10% \/% 600 tenance Exp. of Car 2.000 Office Expenses 4.009 Domestic Expenses 1,20,000 Plant Purchased for Office) a0 Car Purchased ‘)/) 25,000 Life Insurance Premium. 5.000 Donation to Recognised Institution 1.200 Gift to married daughter 400 Income tax : 3,500 Assessment Expenditure ,/ 200 Bank deposit 13,000 Public Provident Fund Balance c/d (a) 1/3rd part of the building is used for profession and 2/3rd for self residence, (b) The car is used in the profession and personal work equally. (c) Books purchased for teachin, © 40%). Compute Mr. Bajaj’s professional income. Ans. 7 2,31,980. . Dr. Surendra is a renow: basis, furnishes his Rece’ z Balance b/d 14,000 7 Consultation Fees : 2017-18 3,000 Vv 2018-19 15,000 2019-20 2,000 Aisiting Fees 30,000 Loan from Bank for professional purposes 25,000 / Sale of Medicines 60,000 Gift and Presents (4° 5,000 _7 Remuneration from Articles Published in Professional Journal 6,000 Dividend 10,000 Interest on Post Oifice Savings Bank A/c in Joint names 7,000 2 1,77,000 Compute his Taxable Professional Inco account the following additional infor () V/Srd of the use of car relates to his p (ii) Depreciation on Motor-car allowable equipment it is 15%. ome for the Assessment Year 2019-20, after taking i ‘mation : is 1 g @ 200 and remaining for the profession (Allow depreciation (7.19) ned medical practitioner who maintains books of account on a cash ‘ipts and Payments Account for the Financial Year 2018-19 “Rent of Clinic: 2017-18 2018-19 2019-20 Electricity and Water Bills © Professional Books (Annual Pub.) “)“ Household expenses Collection Charges on Dividend Income Motor-car Purchased ?\; wy Surgical Equipments — \, ‘no Income tax \ Salary of Staff —~ Life Ins. Premium Gift to wife Interest on Loan ~ Car expenses y\ 1, Purchases of Medicines ~ Balance e/a into use, A %, on books, it is @ 40% and on surstPROFITS AND GAINS OF BUSINESS OF Fi Gifts and presents include z 3, £2,000 received as Birthday G ) Closing stock of medicine: ve '¢ 38,680. AL. Since the assessee maintains his books of account on a cash been treated as income and expenditure inspect vce 2, Remuneration from Articles published in professional Jo §, Birthday Gifts from relatives are not tareblo, “enn {Dividend from a domestic company te ng a1. The Profit and loss account for the ye OFESSI 7 100 from patie, ifts from relatives, 8 amounted to 7 5,500, Notes rs to which they relate, Is is professional income. a professional income. It is exempt u/s 10(34), ‘ar ending 31st March, 2019 is as follows : 261 nts in appreciation of his medical service and (7.20) sis the actual receipts and payments have z z Cost of Goods sold 7,50,000 Sale proceeds of Goods 23,00,000 Salary to employees 9,90,000 Other expenses: 1,00,000 Net profit 4,60,000 23,00,000 23,00,000 The salary of & 9,90,000 comprises & 9 % 90,000, = 60,000 is credited in the em 10,000 as employees’ contribution towards RPF. Out of 'ployees ‘provident fund within due date’ and the balance is credited after ‘due date’, Compute the Income from Busines: 's for the Assessment Year 2019-20. (7.21) Ans. 4,90,000 22, From the following information profession for the Assessment Year 2019.20 - of a Chartered Accountant, compute taxable income from Receipts . Payments : Consultation fees 2,50,000 Office Rent 25,000 Gifts from clients 20,000 Stipend to Article Clerks 20,000 Gifts from father-in-law 30,000 Professional books (not annual Appellate Tribunal Appearance 12,000 publication) purchased 18,000 Fees for drafting Memorandum of Charitable Donation by Cheque 4,000 Association 10,000 Professional Tax 2,000 Allow depreciation on books @ 40%, Ans. & 2,37,800. (7.22) > Short Numerical Questions 1. Profit and Loss account of M/s Balaji Traders shows a net profit of % 1,00,000 after debiting the amount is withdrawn for personal expenses % 10,000, Life Insurance Premium % 15,000, Income tax % 22,000, expenses relating to income tax proceeding % 15,000 and municipal tax relating to the self-occupied property % 1,400. Compute his taxable income under the head ‘Profit from Business’. (S.Q. 7.1) Ans. @ 1,48,400, %. Mr. Pramod prepared Profit and Loss Account of his shop for the year ended 31,3.2019 : z z Salaries 13,000 Gross Profit 34,725 ent 1,600 Gift received from friends 275 Household expenses 2,000 Income-tax ‘900 Advertisement 800 rmployees welfare expenses 900 Life Insurance premium 2,100 Sad debts reserve 800 Net profit 12,900 7 35,000 35,000, Compute his income from the business 8.2 18,425, (S.Q. 7.2)