Profit & Gains from Business & Profession-Part 2

Income Tax-II
ASSESSMENT YEAR: 2021-2022
PREVIOUS YEAR: 2020-2021

Compiled by :
Dr.Umakanth.S, Mr.Avinash Raj David, Dr.Supriya Rai & Vivek Gupta

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Profit & Gains from Business & Profession –Part 1 INCOME TAX-II [AY: 2021-2022]

COMPUTATION OF INCOME FROM BUSINESS

Indirect Method (sec 30-43D)

Particular `
NET PROFIT AS PER PROFIT AND LOSS A/C
ADD: INADMISSIBLE EXPENSES
(Expenses Debited To P/L A/c But Not Allowed As Per IT Act)
Any provision and reserves
Any Capital Loss
Any Donations
Personal Expenses
Any Gift (except business gift)
Fine/Penalty
Past losses
Any personal savings
Expenses on illegal business
Interest on capital
Payment exceeding Rs.10,000, not by cheque (100% of such amount
disallowed)
Income tax and Wealth tax
Charity and Donations
Household expenses
Legal expenses for the criminal case
Legal expenses on acquiring an asset
Patents purchased
Drawings
Excess Depreciation
Life Insurance Premium
Salary paid outside India without TDS
Tax on perquisites paid by the employer
Contribution to Un-recognized gratuity fund, URPF and Welfare
fund
Advertisement in magazines, brochure, pamphlet, etc of the political
party
Over-Valuation of opening stock
Undervaluation of closing stock

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ADD: Business income

(not credited to P/L account)
Amount of liability foregone by the creditor/ Sales / Commission /
sundry receipts received.
Bad debts recovered but fully allowed earlier
Cash assistance received by the assessee against exports under any
scheme of government of India or export incentives
Interest from debtors for delayed payments
Profit on sale import license
Rent received from employees
Rent received from paying guest
Profit on sale of license
Custom/excise duties recovered but earlier allowed as deduction.

LESS: ADMISSIBLE EXPENSES NOT DEBITED TO P/L A/C

Under-Valuation of opening stock
Overvaluation of closing stock
Advertisements expenses/ (Advertisement given in magazines or
souvenir of a political party is inadmissible)
Rent rates and repairs and insurance for the building

Audit fees
Bad debts
Contribution towards rural development program and conservation
of natural resources
Demurrage paid to railways (allowance for undue detention of railway
wagon or ship)
Discount and allowances
Depreciation allowable
Unabsorbed depreciation
Establishment expenses
Expenditure on the guest house or holiday home facility
Electricity bill/land revenue/repairs/Fire insurance premium/rent of
the premises, which is used for business
Entertainment expenses
Expenditure by way of payment to association and institutions for
rural development programme

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Expenditure on scientific research

Revenue expenditure on research carried on by the assessee is fully
deductible if such research relates to the assessee business, 100%
Capital expenditure on research carried on by the assessee is fully
deductible If such research relates to the assessee's business.
(Deduction is available even if the asset is not put into use for
research by the assessee during the previous year)
Contribution to an approved scientific research association
or university or company registered in India is admissible to the
extent of 100% of actual contribution
Contribution to an approved university, college or other
institutions for the purpose of research in social sciences is
admissible to the extent of 100% of actual contribution
Contribution to the National Laboratoryis admissible to the extent of
100% of actual contribution
Festival expenses
Gifts and presents not made in a personal capacity
Expenditure on promoting family planning among the employee's
Income tax expenses
Loss of stock due to theft by an employee
Legal expenses for filing an income tax appeal
Legal expenses to defend an existing title to a capital asset
Municipal taxes of quarters let out to employees
Other expenses incurred according to provisions of law
Postage and telegrams
Printing and stationery
Railway freight and octroi expenses
Services charges
Subscription to a trade or professional association
Salaries/wages/perquisites/allowances to employees
Staff welfare expenses
Tournament expenses
Telephone installation charges under OYT scheme
Travelling expenses related to business
Training expenses
1/5th of Preliminary expenses
LESS: INCOME NOT TAXABLE UNDER THIS HEAD
Interest on Government securities
Dividend on shares

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A gift from Father or Relative

Bad debts recovered but disallowed earlier
Agricultural Income ( India)
The gift from father/ Relatives
Income tax refund
Withdrawal From PPF
Rent from House Property
Income tax refund
Sale of a car
Customs duty/excise duty recovered but disallowed earlier
Dividend from an Indian company / UTI
Interest from PO savings bank account
Refund from LIC
INCOME FROM BUSINESS

1. Following is the profit & loss account for Mr.Chandru for the year ending 31.3.2021.

Particulars Rs. Particulars Rs.

To Salaries 3,30,000 By Gross Profit 5,00,000
To Office expenses 36,000 By Bad debts recovered 20,000
To Depreciation 28,000 By Dividends 6,000
To Sales Tax 18,000 By Rent from House property 18,000
To Legal expenses 16,000 By Commission 20,000
To Income Tax 14,000 By Brokerage 20,000
To Exp. On acquisition . of Patent 24,000 By Sundry Debtors 10,000
rights ½ of Rs.48000 being the
cost of patent
To Repairs 12,000 By Share of Income from HUF 6,000
To Donation 4,000
To Provision for bad debts 6,000
To General expenses 24,000
To Net Profit 88,000
6,00,000 6,00,000
Additional Information:

1) Salaries include Rs.12,000 paid to workers employees at home.

2) Depreciation of Rs.6,000 being unabsorbed depreciation of earlier years, not recorded in
P&L a/c.
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3) Legal expenses include Rs.2,000 paid to the lawyer in connection with the personal case.
4) General expenses include Rs.8,000 as a contribution to staff welfare Fund.
5) Out of bad debts recovered only Rs.8,000 were allowed as a deduction earlier
6) Depreciation on patents has not been recorded in Books of Accounts.
Calculate the income of Mr.Chikku from the Business for AY 2021-2022.

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2. From the P& L account of Mr Raj for the year ended 31/3/2021, compute the income from
Business for the AY 2021-2022.

Particulars Rs. Particulars Rs.

To Office expenses 40,000 By Gross profit b/d 6,40,000
Interest on
General expenses 16,000 11,200
GovtSecurities
Bad debts Recovered
Interest on bank o/d 4,000 (not written off earlier 800
year)
Audit Fees 4,000 Sundry Receipts 16,000
Interest on Capital 12,000 Dividend 16,000
Rent 20,000
Provision for Income Tax 16,000
Charity 8,000
Legal expenses 4,000
Compensation to retrench
20,000
employees
Extension of Building 36,000
Sales Tax 8,000
Net profit 5,12,000
7,00,000 7,00,000
Additional Information:

1) General Charges included Rs.8,000 towards Purchase of a Computer

2) Legal expenses include Rs.1,600 penalties by the customs authority.

3) Rent includes Rs.8,000 paid as the rent of the house in which the assessee lives.

4) Depreciation allowed Rs.12,000 as per Income Tax rules. (Excluding depreciation on

Computer Purchased)
5) Income Tax Provision is excessive to the extent of Rs.5,000.

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3. Mr Prasad has prepared the following P& L Account for the year ending 31.3.2021.

Particulars Rs. Particulars Rs.

To Salary to Employees 8,000 By Gross profit 1,37,300
Dividends from Indian
Advertisement expenses 4,000 4,000
Company
Interest on Securities(Non-
Sundry expenses 4,500 92,000
Trade)
Lottery Winning
Interest on Capital 2,000 15,000
(TDS Rs.3,000)
Fire Insurance Premium
3,000
(Rs.1000 relates to HP)
Income tax 7,000
Household expenses 2,500
Bad debts 1,000
Provision for Bad debts 500
Repairs for HP 1,000
Municipal Tax of HP 3,600
Life Insurance Premium 6,000
Donation to Congress party 2,000
Depreciation (allowable) 3,700
Net Profit 2,16,000
2,64,800 2,64,800
Additional Information:

1) Mr Prasad owns a house property, which is used as follows:

2) 25% of carpet area for his own Business, 25% for his own residence, 50% is let out.

3) Advertising expenses include the expenditure of Rs.3,000 on Neon signboard.

Compute his Taxable income from Business for AY 2021-2022.

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4. From the following Profit & Loss account of Mr.Sachin, compute his income from the business for
the AY 2021-2022.

Particulars Rs. Particulars Rs.

To salaries 6,000 By gross Profit 1,22,000
Purchase of Machinery
11,000 Interest on Debentures 2,000
for research
Life insurance
6,000 Dividend from UTI 2,000
premium
Bonus to staff 12,000 Discount received 6,000
Printing & Stationery 4,000 Horse race gains (gross) 32,000
Household expenses 15,000 Refund of IT 7,500
Miscellaneous
5,000 Cash assistance from Govt. 6,000
expenses
Advertisement paid in
22,000
cash
To car expenses
Petrol Rs. 12000
18,000
Drivers salary
Rs.6000
Property tax (Realtes to
4,000
HP)
Medical expenses of
3,000
his wife
Provision for sales tax 10,000
Depreciation 10,000
Gifts & Presents from
2,000
relatives
Net profit 49,500
1,77,500 1,77,500
Adjustment Information:

1) ½ of the car expenses are for personal use

2) Depreciation on all assets is Rs.7,200
3) Research conducted by Mr.Sachin is related to his Business.

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5. Mr.Sairam, a trader furnishes the following information.

Particulars Particulars
Rs. Rs.
To General expenses 4,80,000 By Gross Profit 22,00,000
Salary of staff 2,40,000 Commission 40,000
Salary to Sairam 1,20,000 Bad debts recovered 60,000
(earlier allowed)
Interest on Capital 60,000 Interest on listed 1,00,000
debentures
Interest on overdraft 40,000
To extension of 1,50,000
building
Interest on loan 40,000
Depreciation 1,20,000
Travelling expenses 80,000
Audit fees 72,000
Fire insurance 78,000
Bonus to staff 1,00,000
Contribution to RPF 1,22,000
Advertisement 2,00,000
Reserve for bad debts 60,000
Bad debts are written 90,000
off
Net Profit 3,48,000
24,00,000 24,00,000

Additional Information:

1) Depreciation was allowable as per IT rules Rs.1, 40,000excludes depreciation on a

permanent signboard. Advertisement includes Rs.50,000 being the cost of Permanent

signboard; Income of Rs.60,000 accrued the previous year not entered into P& L Account,
Loan was taken to pay Income tax arrears.

2) Rs.40,000 paid as damages for failure to fulfil a contract in time are included in general
expenses.

Compute taxable income from Business for the AY 21-22

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6. From the following compute Business Income for the AY 21-22

Particulars Rs. Particulars Rs.

To Rent 60,000 By Gross profit 5,23,000
Rates 6,000 Interest on Debentures 28,000
Salary to staff 54,000 Rent from property 24,000
Diwali puja expense 2,000 Sunday Income 16,000
Interest on Loan 1,25,000 Commission 37,000
Bad debts recovered
Sundry expenses 55,000 10,000
(Disallowed Earlier)
Bad debts 6,000
Charity 1,000
Reserve for Bad debt 2,000
Entertainment 8,500
Loss by theft 14,000
Sales Tax penalty 10,000
Net profit 2,94,500
6,38,000 6,38,000

Additional Information:

1) Rent includes Rs.12,000 of a shop belonging to assessee himself

2) Salary of staff includes a salary of Rs.24,000 of a son who is a B.com student and who

casually helps in the business and proprietors salary Rs.1,000 p.m

3) A loan of Rs.60,000 at 15% p.a. is taken from his wife out of funds advanced by him and
interest is included in interest on the loan.
4) Sundry expenses include Rs.9,000 being expenses incurred on Pilgrimage to Haridwar.,

5) Entertainment expenses Rs.1,500 spent on tea of the same guests of a local MLA. ,
6) Loss by theft took place when somebody pretending to be a customer stole a necklace worth
Rs.6,000 in his shop, Rs.8,000 was stolen from his house. He earned Rs.40,000 in gold
smuggling not shown in books.
7) Rates include Rs.4,000 for the Property let out.

8) Sales tax paid and depreciation not taken to Profit and loss account Rs.8,000 and Rs.5,000.

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7. Mr.Dravid presents a Trading & P& L Account for the previous year ended 31stMarch 2021 and
requires you to compute from Business for the Assessment year 2021-2022

Particulars Rs. Particulars Rs.

To opening stock 85,000 By sales 394000
To purchases 2,40,000 By Closing stock 1,10,000
To wages 35,000
To carriage forward 12,000
To Gross profit 1,32,000
5,04,000 5,04,000
To staff salary 18,750 By Gross Profit 1,32,000
By interest on
To bank cash transaction tax 12,000 17,800
Debentures(net)
By bad debts
To audit fee 5,500 recovered 5,200
(Previously allowed)
To income tax 32,000 By Sundry Income 2,650
By Rent from House
To car expense 15,000 90,000
let out
To Office expense 40,000
To Donation 2,500
To general expense 18,650
T o sales tax provision 16,000
To Technical Know-How
30,000
purchased during the year
To interest on capital 16,000
To Depreciation on car 18,000
To provision for Bad debts 6,500
To net Profit 16,750
2,47,650 2,47,650
Additional Information:

1) Opening stock is undervalued by 15%

2) Closing stock is overvalued by 10%
3) Purchase includes a cash payment of Rs.30,000 towards raw materials
4) 20% of car expenses are attributable to the use of the car for personal purposes.
5) Out of the incometax and sales tax provision, Income tax of Rs.6,250 and sales tax of
Rs.1,250 were paid before filing the return of Income.
6) Donation of `5,000 to Delhi University for carrying on research in Social Sciences.

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8. Dr.Ram has prepared the following P/L account for the assessment year 2020-2021.

Particulars Rs. Particulars Rs.

To Salary 48,000 By Gross profit 2,37,000

Advertisement expenses 24,000 Rental Income 1,65,000
Dividends from
Sundry expenses 54,500 24,000
Indian Company

Fire insurance (Rs.10,000 Winnings from

30,000 1,15,000
Lottery (Gross)
relates to HP)
Interest on Non-
Income tax 27,000 Government 1,92,000
Securities.
Household expenses 42,500
Contribution to National
Laboratory for carrying on 11,000
Research
Provision for bad debts 10,500
Repairs to HP 10,000
Municipal Taxes of House
36,000
Property
Insurance Premium on own
6,000
life
Donation to Political Party 12,000
Depreciation (Allowable) 23,800
Net Profit 3,86,000
7,33,300 7,33,300
Dr.Ram owns a house property having 4 units out of which Unit –I: having 25% carpet area is
used for own business purpose. Determine the income under the head profits and gains from
Business or Profession for the year FY 2019-2020.
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9. From the following P&L account of Mr.Raja, compute business income for the AY 21-22.
Particulars Rs. Particulars Rs.
To general expenses 1,07,000 By gross profit 5,40,000
By bad debts
To fire insurance premium 2,000 recovered but 4,000
disallowed earlier
By interest from Govt
To bad debts 1,000 4,000
securities
By Rent received from
To salaries 1,65,000 12,000
employees
By interest from
To advertising (In cash) 22,500 debtors for delayed 6,000
payment
To proprietor’s salary 1,12,500
To interest on capital 2,000
To Income tax 1,000
To depreciation 2,000
To GST (due) 5,000
To advance income tax paid 1,000
To donations 500
To motor car expense 750
To municipal taxes of quarters
5,000
let to employees
To net profit 1,39,000

5,66,000 5,66,000
Additional information
a. General expense include Rs. 4,000 paid as compensation to an old employee whose
services were terminated in the interest of the busieness and Rs. 2,200 by way of help to
a por student
b. Depreciation calculated according to the rates comes to Rs. 2,900
c. GST was paid on 1-5-2021. Date of filing of return is 31-07-2021
d. 50% of motor car expense are for proporietors personal use

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10. From the following P&L account of a manufacturing, compute the income under the head
profits and gains of business or professioin for the year ending on 31st march
Particulars Rs. Particulars Rs.
To salaries to employees 1,95,000 By gross profit 5,80,000
To advertisement expenses (in
24,000 By interest on securities 14,000
cash)
By income from house
To general expenses 16,000 25,000
property
By bad debts recovered
To entertainment expenses 22,000 12,000
(allowed earlier)
To bad debts 1,500
To drawing by the proprietor 24,000
To GST (due and paid on 01-
6,000
07-2020)
To interest on proprietor’s
7,000
capital
To repairs 2,500
To rent 21,000
To legal expenses 5,000
To depreciation 15,000
To bonus (due) 6,000
To bonus to proprietors 4,000
To car purchased 72,000
To expenses on car during the
12,000
year
To donations 2,000
To provisions for bad debts 6,000
To net profit 1,90,000
6,31,000 6,31,000
Additional information
a. Advertisement expense were spent on insertions in news papers
b. Rs. 3,000 were spent on purchase of land and are included in legal expenses
c. Half of the repair expenses were on let-out building
d. Depreciation allowable on all assets including car is Rs. 14,400
e. Bonus was paid to employees on 30-06-2021 and date of filing of retun is 31-07-2021

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11. The following is he profit and loss account of a merchant for the year ending 31-3-2021
Profit and Loss account

Particulars Rs. Particulars Rs.

To office salary 2,06,500 By gross profit 4,36,750
To bad debts written off 1,700 By commission 1,250
To provision for gad debts 3,000 By discounts 500
To advertisement 53,800 By Sundry receipts 200
To fire insurance premium
550 By rent of building 3,600
(HP)
By profit on sale of
To general expenses 52,750 3,000
investments
To depreciation 1,200
To interest on capital 2,000
To interest on bank loan (due) 1,300
To net profit 1,22,500
4,45,300 4,45,300
Compute the taxable profits from business. The amount of depreciation is Rs. 1,000. Interest on
bank loan was paid on 01-08-2021. Due date of filing of returns is 31-07-2021

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FORMAT FOR COMPUTATION OF INCOME FROM PROFESSION

AY: 2020-21
Assessee: FY: 2019-20
PARTICULARS AMOUNT AMOUNT
Add: PROFESSIONAL RECEIPTS --
LESS: PROFESSIONAL EXPENSES --
INCOME FROM PROFESSION --

Problems on Profession:

1. Dr Gupta is a Medical Practitioner of Lucknow. Calculate his income from profession.

Particulars Rs.
Gross receipts from dispensary 2,35,000
Gross receipts from Consultation 1,65,000
Operation fees 2,50,000
Visiting Fees 50,000
Gifts from patients 30,000
Medicines Purchased 1,25,000
Closing stock of Medicine 35,000
Salaries paid to the employee 1,50,000
Surgical equipment Purchased 48,000
Attended a medical seminar in Germany to update Knowledge 25,000
He owns a house whose municipal value is Rs.50,000.
Half portion of the house is used for the profession.
Expenses paid on the house is municipal tax 10% of M.V Repairs Rs.10,000
Medical books purchased 20,000

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2. Shri.Som is a leading lawyer of Mumbai. He deposits in the Bank all the receipts and always
pays all the expenses by cheque. The analysis of his bank account for the year ending 31.3.2021
is as follows

Particulars (Rec) Rs. Particulars (Pay) Rs.

Balance b/d 58,340 Salaries 14,000
Professional fees 3,90,000 Rent of Chamber 9,500
Dividend 7,160 Telephone Expenses 1,000
House rent 22,500 Magazine Subscription 3,000
Income from Horse Race (Gross 10,000 Motor car exp. 28,000
15000)
Share of Income from HUF 7,110 Misc.office Expenses 5,500
Purchase of motor Car 2,00,000
Advance Payment of Income 40,000
Tax
Donation to Bombay 10,000
University
Personal Exp. 1,45,500
HP expenses 10,000
Taxes: `5000
Repairs `1500
Insurance `1500
Collection charges `2000
Balance c/d 28,610
4,95,110 4,95,110

Compute his Income from Profession after taking into account the following information:

1) 1/4th of the Motor car expenses related to Personal use.

2) Rate of Depreciation of Motor car is 15%
3) Shri.Som stays in his own house,the gross annual value is
Rs.9,800 which includes Insurance Premium Rs.500 Municipal Taxes Rs.2,400

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3. Shri.Naik is a Chartered Accountant.He has prepared the following Income and expenditure
account for the year ending 31.3.2021.

Particulars (Exp) Rs. Particulars (Income) Rs.

Office expenses 10,000 Audit fees 1,70,500

Employees salary 5,000 A gift from Father-in-law 5,050

Books other than annual 5,500 Dividend 8,000

Publication

Personal expenses 1,02,000 Profit from sale of 6,450

Investments

Donations to NDF 500

Interest 700

Income tax 13,300

Car expenses 2,000

Net surplus 51,000

1,90,000 1,90,000

Additional Information

1) The car is used equally in official and personal purpose and allowed depreciation for

official work is Rs.500.

2) Rs.1000 is a domestic servant salary is included in employees salary. The loan has

been taken for personal purposes.

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4. Krishna is a Chartered Accountant in Bhopal. Compute his Professional Income.

Particulars ` Particulars `
Office rent 33,000 Audit fees 3,00,000
Financial
Salary to Staff 75,000 Consultancy 60,000
service
Interest on
Charities 5,000 deposits in a 22,000
bank
Dividends on
Gifts to relatives 6,000 6,000
Units of UTI
Accountancy
Subscription for journals 2,400 32,000
Works
Drawings 16,000
Car expenses 24,000
Household expenses 8,600
NSC purchased 20,000
Net income 2,30,000
4,20,000 4,20,000

Additional Information:

1) Office rent Rs.3000 though paid is not recorded

2) Depreciation of Car during the year is Rs.6000

3) 30% of car expenses are related to personal purposes.

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5. Mr.Nariman lives in Delhi is an advocate and his receipt and payment accounts as follows:

Receipts Rs. Payments Rs.

Books purchased
Balance b/d 1,892 800
(Annual Publication)
Sitting fee 40,000 Repairs to godown 1,200
Municipal tax on
Salary as a part-time lecturer 3,600 600
godown
Exam remuneration from Maintenance expenses
2,300 2,000
University of car
Telephone installation
Interest on fixed deposits 1,200 4,000
charges
Sale proceeding of car 18,000 Domestic expenses 20,000
Plant purchased for
Sale proceeds of shares 16,000 700
office
Dividends received 1,540 Car purchased 25,000
Life insurance premium 5,000
Donation to
1,200
Recognized Institution
Gift to Father 400
Income Tax 3,500
Assessment Expenses 200
Bank deposit 13,000
Public provident fund 4,000
Balance c/d 2,932
84,532 84,532

Additional information:

1) 1/3 part of godown is used for profession and 2/3 for self-occupation.
2) Books purchased for teaching `200 and remaining for the profession
3) Car is used 50% for professional purpose.

Compute Mr.Hari’s Professional Income.

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6. Shri Pandey is a lawyer from Bikaner. Based on the following details prepare his income
from profession. Compute taxable professional income of Pandey for the AY-21-22

Particulars ` Particulars `
House hold expenses 1,12,000 Legal fees 3,26,000
Office expenses 7,000 Special Commission 1,400
appointment fees
Charity 500 Cash gift received from clients 2,000
Telephone expenses 500 House rent 15,000
Income Tax 900 Int. on Govt.Securities 3,000
Rent 4,000 Salary as a part-time lecturer in 6,000
law
Gifts to Daughter 2,000
Electricity Charges 1,000
Donation to NDF 1,000
Contribution to PPF 2,400
Books used inthe 3,000
profession(Annual
Publications)
Salaries 15,000
Purchase of Motor Car 60,000
Purchase of Furniture 2,000
Life Insurance Premium 5,000
Motor car Expenses 6,000
Purchase of Typewriter 6,000
Expenses of Income over 1,25,100
expenditure
3,53,400 3,53,400

Additional Information

1) He lives one half of the house and the other half is used for the office. Rent &
electricity charges are with respect to the house.
2) One-half of car expenses are for personal use.
3) Depreciate motor car @15% ,Typewriter @15% and furniture @ 10%.

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7. From the following income and expenditure account and additional information of
Dr.Deva who maintains books of accounts under mercantile system of accounting,
compute taxable income from profession for the assessment year 2021-22

Expenditure Rs. Income Rs.

Rent of clinic Consultation fees
19-20 1,000 19-20 5,500
20-21 20,000 20-21 85,000
2021-22 2,000 2021-22 10,000
Electricity and water 2,200 Visiting fees 65,000
House hold expenses 15,000 Loan from bank (for 1,25,000
profession)
Municipal taxes on house 3,000 Loan from bank (for 50,000
property personal)
Purchase of motor car 1,20,000 Gifts from patients 20,000
Laptop purchased (on 1- 30,000 Remuneration for articles 8,000
3-2021) published in professional
journal
Income tax 12,000 Gift from medical 60,000
representatives
Salary to compounder 24,000 Operation theatre rent 15,000
Purchase of books 6,000 Rent from house property 12,000
Expenses on IT 8,000 Interest on post office NSC 2,000
proceedings
Life insurance premium 15,000 Income from horse race 30,000
Gift to wife 10,000
Interest on loan 10,000
(profession)
Interest on loan 4,000
(personal)
Loan installment paid 25,000
(profession)
Donation to a notified 10,000
temple
Car expenses 20,000
Purchase of surgical 30,000
equipment
Purchase of medicines 35,000
Excess of income over 85,300
expenditure
4,87,500 4,87,500
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Additional information
a. 40% of car expenses are for personal use
b. Depreciation on car and surgical equipment is @ 15% and on laptop and books
is @ 40%
c. Income tax includes Rs. 2,000 professional tax paid to state government
d. Gifts from patients include Rs. 8,000 receiver on the occasion of marriage from
friends
e. Closing stock of medicines is Rs. 7,500 and the opening stock was Rs. 34,000

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8. Dr.Lakshmi is a renowned medical practitioner. He furnishes his receipts and

payments account for the financial year 2020-2021
Receipts Rs. Payments Rs.
To balance b/d 35,000 By electric & water 12,000
To consultation fees By rent of clinic
2019-2020 50,000 2019-2020 1,600
2020-2021 70,000 2020-2021 14,800
2021-2022 12,000 2021-2022 16,600
To visiting fees 30,000 By purchase of professional 18,000
books
To loan from bank for 1,75,000 By household expenses 17,800
professional purposes
To sale of medicines 70,000 By municipal taxes paid on 2,000
property
To sales tax on medicine 3,000 By sales tax on medicine 2,800
To gift from patient 50,000 By purchase of motor car 1,45,000
To remuneration from 16,000 By fire insurance on 2,000
articles published in theproperty
professional magazine
To rent from house 11,000 By surgical equipment 4,700
property
To interest on post office 7,000 By advance income tax 13,000
national saving certificate
By salary to nurse 40,000
By entertainment expenses 6,000
By purchase X-ray machine 1,00,000
By expenses on income tax 15,000
proceedings
By life insurance premium 15,000
By gift to wife 5,000
By interest on loan 2,000
By loan a/c – instalment paid 15,000
By donation to apolitical 13,700
party
By car expenses 15,000
By thepurchase of medicines
35,000
By balance c/d 17,000
5,29,000 5,29,000
Compute Dr.Lakshmi professional income for the assessment year 2020-2021 with
the help of the following additional information
a. One-third of car expenses is for personal use
b. Depreciation on the motor car is 15%,

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c. Remuneration from articles includesRs. 3,000 received for setting the question
paper.

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9. From the following statement, compute the income from professioin of Dr.Kapoor if
accounts on cash/receipts system
Cash receipts Rs. Cash paymens Rs.
To visiting fees 45,000 By dispensary rent 36,000
To consultation fees 1,25,000 By electricity and water 6,000
charges
To sale of machinery 72,000 By telephone expenses 6,000
To dividend 5,000 By salary to nurse and 36,000
compunder
By depreciation on 6,000
surgical equipment
By purchase of medicines 38,000
By depreciation on X-\ray 4,000
macine
By income tax 5,500
By donation to rama 4,000
Krishna mission
By motor car expenses 9,600
By depreciation on car 4,800
By balance c/d 91,100
2,47,000 2,47,000
Additional information
a. Electricity and water charges include domestic bill of Rs. 2,500
b. Half of moto car expenses are for professional use
c. Telephone expenses include 40% for personal use
d. Opening stock of medicines was Rs. 6,000 and closing stock was Rs. 4,000

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