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19.12                                                  Double Entry Book Keeping—CBSE XI

                      5.  Net Profit of a firm for the year ended 31st March, 2024 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, 2024.

                     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 & LOSS ACCOUNT
                     Dr.                         for the year ended 31st March, 2024                  Cr.
                     Particulars                         `      Particulars                        `
                     To  Manager’s Commission Outstanding      1,000


                                                        BALANCE SHEET
                                                      as at 31st March, 2024
                     Liabilities                         `      Assets                             `
                     Current Liabilities
                     Manager’s Commission Outstanding      1,000
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