Net profit is 81900 .the manager entilled to a commission of a @ 10% of the net profit after charging such commission
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DRR is created out of profits of the company & is debited to the statement of P&L(which means profit is reduced). now at the time of redemption of debentures, DRR is transferred to general reserve to give effect to the earlier reduction in profit.
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Calculation of Commission
Explanation:
Given:
Net profit during the year = 81,900
Commission to manager = 10% after charge
Commission to manager = ?
Computation of commission to manger:
Commission to manger = Net profit during the year x [10% / (100% - 10%)]
Commission to manger = 81,900 x [10% / (90%)]
Commission to manger = 9,100
Therefore commission to manager is 9,100
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