Computation of Income from Business

Income from Business with Problem and solution

1. COMPUTATION OF INCOME FROM BUSINESS PRESENTED BY SELVA SHREE V

2. INCOME TAX It is a tax that governments impose on income generated by businesses and individuals within this jurisdiction. By law, tax payers must file an income tax return annually to determine their tax obligations..

3. COMPUTATION OF INCOME The process of determining the different source of income is called as the computation of income….

4. FORMAT PARTICULARS AMOUNT( ₹ ) AMOUNT( ₹ ) Net profit as per profit & loss a/c XXX ADD: Inadmissibl e expenses:(not allowed but debited to profit & loss a/c) XXX Admissible income:(allowed but not credited to profit & loss a/c) XXX Over valuation of opening stock XXX Undervaluation of closing stock XXX TOTAL XXX

5. LESS: Admissible expenses:( allowed but not debited to profit and loss a/c) XXX Inadmissibl e income:(not allowed but credited to profit & loss a/c) XXX Admissible income:(allowed but not credited to profit & loss a/c) XXX Undervaluation of opening stock XXX Overvaluation of closing stock XXX TOTAL XXX INCOME FROM BUSINESS XXX

6. PROBLEMS QUE : The books of manufacturing concern disclose the following information: Profit & Loss a/c To opening stock 338000 By sales 870000 provision for tax 22000 Closing stock 129000 mis.expenses 1680 depreciation 40000

7. Notes: Miscellaneous expenses includes: penalty for violation of foreign exchange regulations Rs.1200. expenses to defend an criminal case against managing directors Rs.3000 Donations to P.M drought relief fund Rs.2000. Wealth tax paid Rs.3000 Donations to Singh Rs.5000 Bad Debts includes a sum of Rs. 500 for advance to suppliers of raw materials with whom assessee had exclusive arrangement for purchase of search materials. Miscellaneous income include refund of advance income tax Rs.400. Allowable depreciation Rs.36000 From the above particulars compute the business income of the concern.

8. Solution: PARTICULARS AMOUNT( ₨) AMOUNT(₨) Net profit as per profit and loss a/c 30500 Add: Inadmissible expenses: Provision for taxation 22000 Miscellaneous expenses: penalty for violation 1200 Expenses on criminal 3000 Donation to P.M drought 2000 Wealth tax 3000 Donations to Mr.Singh 5000 36200 Less: Admissible expenses Depreciation 36000 (-) Inadmissible Income Income tax 400 BUSINESS PROFIT 70300