Question

Ascertainment of net profit for managerial remuneration

Answer 1

1.Some machinery and other movable assets are sold almost every year and new assets are acquired in their place, since the old assets have lived their useful life or new assets have arrived in the market which is more beneficial etc. 2.Whereas this is not the case with Immovable property or Undertakings. Land once purchased and business established in that place is not shifted every year. Similarly an undertaking say a particular line of business once established is not sold every year. For that matter to set up an undertaking and make it profitable itself takes few years. 3.Hence profit from sale of machineries is not excluded whereas profit from sale of undertakings and immovable properties is excluded.

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