Question

Net profit is 81900 .the manager entilled to a commission of a @ 10% of the net profit after charging such commission

Answer 1

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.

Answer 2

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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