PGBP

PROFITS AND GAINS FROM BUSINESS AND PROFESSION
Q1. Following is the Receipts and Payments Account of Dr. Sharma for the year ended 31 st March, 2022
Receipts Rs. Payments Rs.
To Balance b/d By Salaries 44,000
Cash in hand 1,500 By Bonus to Staff 4,400
Cash at bank 3,000 4,500 By Printing and Stationary 13,600
To Consulting Fees 1,85,000 By Rent of Clinic (paid to wife) 15,000
To Visit Fees 14,500 By Electricity 11,150
To Gifts from Patients 9,000 By Car Expenses 30,000
To Winning from horse race 10,000 By Drawings 48,000
To Amount received under
Keyman Insurance Policy 30,000 By Donations 18,000
By Purchase of Equipment 12,000
By Misc. Expenses 12,000
By Balance c/d
Cash in hand 2,600
Cash at bank 42,250 44,850
2,53,000 2,53,000
(a) Rs. 8,000 is considered as a reasonable rent of the clinic.
(b) Misc. Expenses are incurred for personal purposes.
(c) Half the car expenses are for personal use.
(d) Depreciation allowable according to Income tax Act is Rs. 4,000.
Compute income from Business and Profession of Dr. Sharma for the A.Y. 2022-23
Q2. Following is the Receipts and Payments Account for the year ended 31st March, 2022 of Mr.
Srikanth, a practicing lawyer:
Receipts Rs. Payments Rs.
To Balance b/d 17,000 By Salaries 50,000
To Professional fees 4,20,000 By Office Rent 12,000
By Subscriptions for legal
To Salary as a law lecturer 1,800 publications 6,000
To lottery prize 12,000 By Printing and Stationary 14,400
To Received from his father's HUF
being his share 19,000 By Advance Tax 1,20,000
To Gifts received from Clients 40,000 By purchase of Typewriter 10,000
By Drawings 70,000
By purchase of Car
(15.10.2019) 1,80,000
By Office Expenses 24,000
By Balance c/d 23,400
5,09,800 5,09,800
Other relevant particulars are:

(a) Depreciation on car is allowed at 20%
(b) 1/3 of the car use has been for personal purposes
(c) Depreciate Typewriter by 12.5%
Determine the taxable business income of Mr. Srikanth.
Q3. Mr. Khanna is a practicing Chartered Accountant in Mumbai. For the year ended 31st March, 2022 his
receipts and payments were as under:
Particulars Rs.
Receipts
Fees received from Clients 25,000
Retainership Fees 6,000
Interest on Fixed Deposits with Banks 1,500
Interest on Fixed Deposits with Public Ltd. Companies 2,500
Rent received from sub-letting table space 600
Payments
Salaries to assistants 3,000
Rent and Electricity for office 4,800
Telephone Charges 1,800
Printing and Stationary 600
Car Hire and Taxi fare 1,500
Life Insurance Premium 1,500
Income tax 2,500
Gifts, presents, charity, etc. 500
Typewriter purchased 2,250
Compute his income from profession for the assessment year 2022-23,
Q4. From the following Profit & Loss Account of X for the year ending 31st March, 2022 compute his
business income:
Particulars Amount Particulars Amount
To Office Salaries 1,50,000 By Gross Profit 13,00,000
To General expenses 85,000 By Interest on Bank Deposits 41,000
To interest on Capital of X 30,000 By interest on Company Deposits 76,000
To Bad Debts reserve 50,000 By Refund of Income Tax for
10,000
To Depreciation 1,50,000 A.Y.2019-20
To Advertisement 90,000
To Fire Insurance Premium 12,000
To Donation 50,000
To Advance Income Tax 40,000
To GST paid 50,000
To Income tax for 2020-21 30,000
To Net Profit 6,90,000
14,27,000 14,27,000
Following additional information is given:

(a) Allowable depreciation was Rs. 1,00,000
(b) General expenses include furniture purchased worth Rs. 25,000
(c) Office salaries include salaries paid to Mrs. X Rs. 10,000. Mrs. X, B.Com. writes the
accounts of the business.
(d) Advertisement includes Rs. 25,000 for the advertisement in souvenir of a political party.
Q5. Mr. Roshan is a proprietor of a business. Following was the Profit and Loss Account of his
business for the year end 31st March 2021. You are required to compute his total Income for
the assessment year 2022-23.
Particulars Rs. Particulars Rs.
To Opening Stock 2,34,000 By Sales 12,40,000
To Purchase 10,00,000 By Closing Stock 2,05,000
To Office Salaries 57,000 By Income Tax Refund
To Proprietor's Salary 30,000 (including interest Rs. 2,000) 15,000
To Bad Debts 25,000 By Interest on savings bank 20,000
To Advertisement 10,500 By Dividend from Balaji Ltd 25,000
To Investment in PPF 4,500 By Interest on company deposits 5,000
To Conveyance expenses 6,000 By Lottery prize received 10,000
To Interest on Proprietor’s Capital 25,000
To Medical Expenses of staff 20,000
To General Expenses 35,000
To Wealth tax paid 5,000
To Residential telephone Exp 14,000
To GST penalty 4,000
To Depreciation 30,000
To Net Profit 20,000
15,20,000 15,20,000
Additional Information:
(1) The residential telephone is used half the time for office work.
(2) Purchases include Rs. 80,000 paid for cash purchases, exceeding the limits
prescribed u/s 40A (3) of the Income Tax Act 1961.
(3) General expenses include advanced Income tax of Rs. 10,000 paid during the year
and Rs. 500 for purchase of Lottery Tickets.
(4) Depreciation allowable as per Income Tax Rs. 25,000.

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PROFITS AND GAINS FROM BUSINESS AND PROFESSION

Other relevant particulars are:

Following additional information is given:

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