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Managerial Remuneration (In a Simple way)


M. N. JHA 
posted on 05 July 2010



 

 

                                    Managerial Remuneration

As per Company Act 1956, Managerial Remuneration should be include all the payment and benefit whichever incurred by a company on behalf of its management. Managerial remuneration may include:-

1)     Salaries

2)     Commission

3)     RFA

4)     Life Insurance Policies

5)     Membership fee of club

6)     Cost of car facilities

7)     Any other allowances or benefits.

Note: A person having power of planning, directing and controlling are covered in management. For Examples:- Directors ,MD, Managers or person having same designations etc.

 

Managerial remuneration is given on the basic of net profit. In case of shortage of profit or absence of profit it can be given on the basic of effective capital.

 

Maximum limit of managerial remuneration on the basic of net profit:

 

 

Situation-I

If company having only one whole time director or m.d. or mangers

5% of Net Profit

Situation-II

If company having more then one whole time director or m.d. or mangers

10% of Net Profit

Situation-III

If company having only one part time director or m.d. or mangers

3% of Net Profit

Situation-IV

Situation I+ Situation III

 

6% of Net Profit

Situation-V

Situation II+ Situation III

11% of Net Profit

 

 

Maximum limit of managerial remuneration on the basic of Effective Capital in the absence or shortage of profit:

 

 

Effective Capital(EC)

Remuneration per month

If EC is less then One Crore

Rs.75000 per month

If EC is One crore or more but less then Five crore

Rs.100000 per month

 

If EC is Five crore or more but less then Twenty Five crore

Rs.125000 per month

If EC is Twenty Five crore or more but less then Fifty crore

Rs.150000 per month

If EC is Fifty crore or more but less then Hundred crore

Rs.175000 per month

If EC is Hundred Crore or more

RS.200000 per month

 

For the managerial remuneration we use net profit and effective capital. Now we are going to explain that:-

 

Net Profit:-

                   As per the provisions, profit for the purpose of managerial remuneration should be calculated separately. The following statement can be prepared for the calculation of net profit.

 

          STATEMENT SHOWING CALCULATION OF

                             NET PROFIT (Section-349)

 

Net profit as per financial books                                           xxxx

Provisions (All)                                                                     xxxx

Appropriation (All)                                                                xxxx

Actual Depreciation                                                               xxxx

Depreciation as per company act                                          (xxxx)

Voluntary compensation                                                       xxxx

Voluntary Donation                                                               xxxx

Profit on sale of investment                                                  (xxxx)

Loss on sale of investment                                                    xxxx

Intt./Dividend/Rental/Investment income                             (xxxx)

Profit on sale of Fixed assets                                                (xxxx)

(if profit is higher then provision for depreciation)

Capital Expenditure (Research& Development)                  xxxx

 

                                                                                                ………

                                                                   TOTAL                xxxx

                   *Management Salary                                          xxxx

                   * Management Commission                     xxxx

                                                                                                ……….

                   Profit as per section 349                                    xxxx

                                                                                                ……….

 

* Director Fees should not to be included as a part of managerial remuneration and it should be allowed under the calculation net profit as per section 349.

 

STATEMENT SHOWING CALCULATION OF

                                       EFFECTIVE CAPITAL

Share Capital                                                                          xxxx

Reserve and surplus                                                               xxxx

Long term loan                                                                       xxxx

Investment                                                                              (xxxx)       

Misc. Expenditures                                                                (xxxx)

                                                                                                ……….

                                                          Effective Capital xxxx

                                                                                                ……….

 

۩ The above note is prepared by me on the basic of my knowledge and its included the content which I read in coaching classes.

 

We Hope it will be really helpul for students...THANKS

 

Regards,

JAI KISHAN/Guddu Jha

 


Published in Students
Source : SELF
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