Page 160 - DEBK-XI(2020)

19.12 Double Entry Book Keeping—CBSE XI

5. Net Profit of a firm for the year ended 31st March, 2020 is ` 21,000 before charging
commission. Manager of the firm is entitled to commission of 5% of the net profit.
Calculate the commission payable to Manager.

Case 1. If Manager is allowed commission on net profit before charging such
commission, and
Case 2. If Manager is allowed commission on net profit after charging
such commission.

Also, show the treatment in Final Accounts for the year ended 31st March, 2020.

Solution:

Case 1. Commission allowed on net profit before charging such commission:
Manager’s Commission
% of Commission
= Net Profit before charging such commission × 100
5
= ` 21,000 × = ` 1,050.
100
Case 2. Commission allowed on net profit after charging such commission:
Manager’s Commission
% of Commission
= Net Profit before charging such commission × 100 + % of Commission
5
= ` 21,000 × = ` 1,000.
105

PROFIT AND LOSS ACCOUNT
Dr. for the year ended 31st March, 2020 Cr.
Particulars ` Particulars `
To Manager’s Commission Outstanding 1,000

BALANCE SHEET
as at 31st March, 2020
Liabilities ` Assets `
Current Liabilities
Manager’s Commission Outstanding 1,000