I was going through 1st Chapter in which i found Question P 38 F & G.
Both sections are dealing with Sec.181(1)(c).
The problem is that while calculating Aggregate paid up capital and free reserves in P 38F Net profit for the year has not been included Whereas in P 38G While calculating Aggregate paid up capital and free reserves Credit Balance in Profit & loss A/c has been included.
Now can u Guide me regarding the same whether which answer is correct.
Thank you in Advance
net profit for the period is the profit shown before distribution of dividend.
and cresit balance in profit and loss account is the balance after all deductions and dividend etc that can be transferred to reserves, if wanted,.
therefore credit balance of profit and loss account is a free balance which can be accumulated over years and years (i.e. it is a free reserves) or can be transferred to general reserves but net profit for the period is not a free balance untill and unless transferred to credit balance of pl or general reserves.
hope it is clear.
if there is a mistake, please notify,
wait for others to respond,,
Regards
CAclubindia
