financial statement of company

Managerial remuneration as per companies act 2013 :

Section 197 provides maximum limit of managerial remuneration in case of profit or inadequate profit

  • maximum 11%
  • WTD/MD
  • 1 – 5%
  • More than 1
  • 10%
  • Other director
  • With WTD/MD
  • 1%
  • No WTD/MD
  • 3%
  • MANAGER
  • 5%

If inadequate profit –maximum remuneration

Effective capital (crores)  Limit in lakhs
Negative or less than 5        60
More than 5 less than 100        84
More than 100 less than250       120
Above 250 120+.01%of excess of 250

 

Effective capital = equity share + preference shares + Reserves – profit and loss debit balance

Profit and loss as per 198 of companies act.

Credit is given – government subsidies

Credit is not given

Securities premium

Capital profit – forfeiture of shares, sale of capital assets, immovable properties, undertakings etc.

Revaluation of asset and liabilities

Allowable expenses:

Usual operating expenses

Director’s remuneration

Bonus commission of employee

Special taxes

Interest on loan and debentures

Repairs,

Allowable contributions

Depreciation as per companies  act

Losses arise after commencement of act

Compensation of breach of contract due to legal liabilities,

Insurance paid, bad debt etc.

Not Allowable expenses:

Income tax

Compensation paid voluntary

Capital nature loss

Loss arise due to revaluation of assets or liabilities.

 

 

 

 

 

 

Divisible profit

Available for distribution of dividend to share holders. It is known as free reserve.

Dividend cannot be declared out of capital.

Profit shown in profit and loss account is not necessary to distribute to share holders. It may be available to various provisions and appropriation in priority.

Dividend may be of two types

Cash dividend

Capitalization of profit by way of bonus.

Interim dividend is also a part of dividend

It cannot be higher than average rate of preceding 3 years in case of loss in current financial year.

Profit can be distributed after providing current and previous year depreciation .

Profit can be distributed out of money provided by central or state government.

Declaration and payment of dividend rule 2014

In case of inadequate profit, dividend can be declared out of accumulated profit (past profit and reserve) by complying following conditions:

  1. If dividend is declared in past years, current year dividend cannot exceed average rate of dividend of last 3years
  2. amount withdrawn from accumulated profit cannot exceeds 10% of shareholder’s fund and free reserve as per last audited financial statement
  3. Current year loss should be adjusted first and then from excess dividend can be declared.
  4. after withdraw from general reserve, balance of general reserve not fall below 15% of share capital.

5 dividend can be declared after allowing previous losses up to depreciation against profit.

Dividend distribution tax

Salient features:

It is in addition of income tax

It is charged on gross dividend

It may be paid out of current or accumulated profit.

Rate of DDT = 15%+12% surcharge+3% cess (education and higher education)

If no liability of income tax then also DDT will be paid.

DDT will be paid to Government before declaration, distribution payment of dividend which is earlier.

 

 

Divisible profit

Available for distribution of dividend to share holders. It is known as free reserve.

Dividend cannot be declared out of capital.

Profit shown in profit and loss account is not necessary to distribute to share holders. It may be available to various provisions and appropriation in priority.

Dividend may be of two types

Cash dividend

Capitalization of profit by way of bonus.

Interim dividend is also a part of dividend

It cannot be higher than average rate of preceding 3 years in case of loss in current financial year.

Profit can be distributed after providing current and previous year depreciation .

Profit can be distributed out of money provided by central or state government.

Declaration and payment of dividend rule 2014

In case of inadequate profit, dividend can be declared out of accumulated profit (past profit and reserve) by complying following conditions:

  1. If dividend is declared in past years, current year dividend cannot exceed average rate of dividend of last 3years
  2. amount withdrawn from accumulated profit cannot exceeds 10% of shareholder’s fund and free reserve as per last audited financial statement
  3. Current year loss should be adjusted first and then from excess dividend can be declared.
  4. after withdraw from general reserve, balance of general reserve not fall below 15% of share capital.

5 dividend can be declared after allowing previous losses up to depreciation against profit.

Dividend distribution tax

Salient features:

It is in addition of income tax

It is charged on gross dividend

It may be paid out of current or accumulated profit.

Rate of DDT = 15%+12% surcharge+3% cess (education and higher education)

If no liability of income tax then also DDT will be paid.

DDT will be paid to Government before declaration, distribution payment of dividend which is earlier.

 

 

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