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+--- Thread: Compute business income (/thread-compute-business-income)
Compute business income - skystar - 10-28-2010
Ahmad Foods Limited is famous for its food products. The company is engaged in
agricultural as well as industrial activities. It has its own farms where fruits, tomato, etc.,
are produced. These items along with those purchased from the market are used in
manufacturing ketchup, Jams, Jelly and Marmalade.
Compute the business and the agricultural income from the following information for the
year ended on 30th June, 200A
Sales of goods manufactured..........Rs. 11,250,000
Expenses on agriculture.......................1,500,000
Purchases from the market....................2,250,000
Manufacturing expenses ......................1,125,000
Selling expenses.............................750,000
Financial expenses............................375,000
Administrative expenses......................1,275,000
The market value of the goods produced by the company and utilized in manufacturing is
Rs. 3,750,000.
- Excel - 10-28-2010
TWO PORTIONS TO SOLVE THIS QUESTION
1- BUSINESS INCOME
2- AGRICULTUREAL INCOME
1-SOLUTION
SALES RS. 11,250,000
LESS COST OF SALES
MKT VALUE OF GOODS PRODUCED BY
THE COMPANY IS RS. 3,750,000*
RAW MATERIAL PURCHASED 2,250,000
MANUFACTURING EXPENSES 1,125,000
TOTAL COST OF SALES ( 7,125,000)
GROSS PROFIT 4,125,000
LESS OPERATING EXPENSES
SELLING + ADMIN + FINANCE COSTS (2,400,000)
NET PROFIT RS. 1,725,000
AGRICULTURAL INCOME
MKT VALUE OF GOODS PRODUCED AND USED AS RAW MATERIAL RS. 3,750,000
LESS EXPENSES ON AGRICULTURE (1,500,000)
NET AGRICULTURE INCOME RS. 2,250,000
NOTE* RULE 11 ( AGRICLUTURE PRODUCE AS RAW MATERIAL)
Where a cultivator or receiver of rent in kind uses the agriculture produce as raw material, in his business, then the income chargeable to tax under the head " INCOME FFROM BUSINESS" SHALL BE COMPUTED AS FOLLOW
TOTAL INCOME - MKT VALUE OF AGRICULTURE PRODUCE UTILIZED IN BUSINESS ARE RAW MATERIAL.