Problem on Income from Business or Profession

Problem 1: -

The following is the profit and loss A/c for the Financial Year ending on 31st March 2023 furnished by
Mrs. Surekha

Profit and Loss A/c

Particulars Amount Particulars Amount

To Salary 1,40,000 By Gross Profit 4,57,000
To Advertisement 15,000 By Interest on Fixed 19,000
Deposit
To Depreciation 68,000 By Dividend 6,000
To Rent and Taxes 13,000 By Bad Debts Recovered 15,000
To Municipal Tax of Res. House 9,000 By Commission 25,000
To Goods & Service Tax 25,000 By Sundry Receipts 3,000
To Legal Charges 12,500
To RDD 5,000
To Banking Cash Trans. Tax 8,000
To Interest on Capital 7,500
To bad Debts 9,000
To Net Profit 2,13,000
Total 5,25,000 Total 5,25,000

Other Information:

1. Salary includes payment of Rs. 23000 to daughter of Mrs. Surekha, out of it Rs. 3000 is
excessive as compared to other employees of same category.
2. Allowable amount of depreciation as per income tax rule is Rs. 64000
3. GST includes Rs. 3000 as penalty and Rs. 2000 as interest for late payment of GST charged by
the GSST Authority.
4. Bad debts recovered were written off in the year 2021-22 and admitted by the income tax
department.
You are required to compute taxable income of Mrs. Surekha from business for the
assessment year 2023-24.

Problem 2: -

The following is the Profit and Loss account of Mrs. Universe, Pune for the financial year ending on
31/3/2023.

Particulars Amount Particulars Amount

To Salary 11,60,000 By Gross Profit 30,30,000
To Advertisement 1,15,000 By Interest on Fixed Deposit 19,000
To Reserve for Future Losses 18,000
To Depreciation 1,20,000 By Dividend 6,000
To Rent and Taxes 1,60,000 By Bad Debts Recovered 15,000
To Municipal Tax of Res. House By Commission 1,42,000
To Commission 1,16,000
To Goods & Service Tax By Sundry Receipts 14,200
 To Legal Expenses on I.T. 12,000 By Interest on Fixed Deposit
Proceeding (Personal)
To RDD By Gift from Friend
To Conveyance 18,400
To Stationery (Paid in Cash) 1,15,200
To Bonus 1,16,000
To Interest on Capital 1,13,000
To Contribution to RPF 1,12,500
To Net Profit 11,58,000
Total 33,34,100 Total 33,34,100

Additional Information: -

1. Depreciation allowable under Income Tax is amounted to Rs. 118000

2. Rent and taxes includes Rs. 18000 as property tax on residential house of Mr. Universe
3. Advertisement includes Rs. 112000 as the cost of permanent signboard fixed on the
premises
4. Sundry receipts Rs. 14000 are in respect of recovery of personal loan given to a friend of Mr.
Universe
5. Contribution by the employer to RPF due on 31/3/2023 Rs. 14000 was deposited on
25/6/2023
You are required to compute taxable income from business for the A.Y 2023-24

Problem 3: -

The following is the Receipts and payments Account of medical practitioner for the year ending
March 31, 2023

Receipts Amount Payments Amount

Balance B/D 1,10,000 Clinic Rent 2,20,000
Visiting Fees 2,55,000 Staff Salaries 1,80,000
Consultation Fees 2,75,000 Electricity And water 9,000
Sales of Medicines 1,25,000 Medical Books 4,000
Sale of odd equipment at book 8,000 Purchase of medicines 80,000
value
Operation Theatre Rent 1,15,000 Motor Car Expenses 60,000
Interest and Dividend 20,000 Audit Fees 20,000
Staff Welfare Expenses 8,000
Entertainment Expenses 6,000
Surgical Equipment 1,30,000
Balance C/d 1,91,000
Total 9,08,000 Total 9,08,000

Additional Information: -

1. Depreciation ass per Income Tax Rules on motor car for professional use Rs. 6000
2. One third of motor car expenses relate to his personal use.
3. The rate of deprecation of surgical equipment is 15%. The WDV of equipment brought
forward from earlier year was Rs. 23000
4. Audit fees include income tax appeal expense Rs. 5000
Compute the taxable income from profession for the A.Y 2023-24
Problem 4: -

Mr. Ashish is the proprietor of a business. His profit and loss account for the year ending on 31march
2023 is as follows

Particulars Amount Particulars Amount

To Establishment 19,600 By gross Profit 2,49,600
To Rent, Rate & Taxes 15,800 By interest on Govt Securities 10,800
To household expenses 13,400 By rent from house property 20,700
To Commission 26,100
To Discount and Allowances 3,400
To provision for bad debts 12,400
To Law Charges 13,400
To Gifts & Presents to employees 1,300
To fire Insurance Premium (for Goods) 1,700
To Provision for GST 12,900
To repairs & renewals (for house 3,000
property)
To loss on sale of motor car (used for 13,600
private purposes)
To life insurance premium 13,500
To wealth tax 11,400
To interest on capital 17,000
To audit fees 16,000
To interest on bank loan 12,700
To provision for depreciation 15,000
To provision for income tax 17,800
Net profit 41,100
Total 2,81,100 2,81,100

Other Information: -

1. Rs. 8000 deposited on 10/5/2022 towards GST payable (due date for filling the return is
31/7/2022) the balance remains unpaid.
2. Bad debts written off admitted by income tax department during the year Rs. 1100
3. Amount of income tax actually paid during the year is Rs. 8400
4. Depreciation allowable as per income tax rules is Rs. 3400
5. Law charges are in connection with protection of a trademark
6. Mr. Ashish carries on his business in a rented premises, half of which is used as his
residence. Rent, rates and taxes include Rs. 14800 paid as rent of the premises during the
year
7. Bank loan is taken for business purposes

Computed the business income of Mr. Ashish for the A.Y 2023-24

Problem 5: -

The following is the profit and loss account of Raju, for the year ended 31-3-2023. Compute his
income from business for A.Y 2023-24

Particular Amount Particular Amount

To opening stock 1,15,000 By sales 8,60,000
To purchases 1,40,000 By closing stock 20,000
To wages 1,20,000 By gift from father 27,000
 To rent 1,46,000 By income tax refund 3,000
To repairs of motor car 13,000
To medical expenses 25,000
To general expenses 1,10,000
To motor car 1,30,000
To provision for dep. On motor car 14,000
To advance income tax paid 11,000
To profit for the year 86,000
Total 9,10,000 Total 9,10,000

Following further information is given: -

1. Raju carries on his business from rented premises half of which is used as his residence
2. The use of the car was 3/4th for the business and 1/4th for personal purposes
3. Medical expenses were incurred for treatment of Mr. Raju
4. Wages include Rs. 12500 on account of Raju’s driver
5. As per rule the rate of depreciation on motor car is 15%.

Problem 6: -

The following is Profit and Loss Account of Mr. Suendra, Pune for the financial year ending on 31st
March 2023

Particulars Amount Particulars Amount

To Salary 2,60,000 By Gross Profit 5,20,000
To Rent and Taxes 80,000 By Commission 72,000
To Commission 20,000 By Sundry Receipts 6,200
To Advertisement 16,000 By Interest on Fixed Deposits 55,000
To Depreciation 25,000 By Gift from friend 3,900
To Reserve for future losses 10,000
To Legal Expenses 5000
To Conveyance 10,400
To Stationery 17,200
To Bonus 24,000
To Contribution to RPF 15,500
To Interest on Capital 17,000
To Net Profit 157000
Total 6,57,100 Total 6,57,100

Additional Information:

A. Deprecation allowable under Income Tax rule is amounted to Rs. 30,000.

B. Rent and Taxes includes Rs. 20,000 as property tax on residential house of Mr. Surendra.
C. Advertisement includes Rs. 10,000 as the cost of permanent signboard fixed on the
premises.
D. Sundry receipts Rs. 5,000 are in respect of personal loan given to friend of Mr. Surendra.

You are required to compute taxable income from business for A.Y. 2023-24
Problem 7: -

The following is the Profit & Loss account for year ended 31st March 2023 furnished by Mr. Sagar.

Particulars Amount Particulars Amount

To Salary 78,000 By Gross Profit 2,23,000
To General Expenses 12,500 By Sundry Receipts 8,400
To advertisement 8,000 By Gift from father 25,000
To Fire Insurance 3,500 By Interest on Bank Deposit 6,000
To Depreciation 15,800 By Bad Debts Recovered 5,400
(Not allowed earlier as
deduction)
To Office Expenses 4,500
To Bonus 12,800
To Income Tax 8,600
To VAT(GST) 4,500
To Interest on Bank Loan 5,600
To Donation to Educational 10,500
Institution
To Interest on Income Tax 3,500
To Net Profit 1,00,000
Total 2,67,800 Total 2,67,800

Additional Information: -

1. Salary includes Rs. 4,200 paid to domestic servant.

2. Advertisement includes Rs. 550 as expenditure incurred for selling house hold furniture.
3. Allowable depreciation as per Income Tax Rules Rs. 14,000
4. VAT (GST) includes Rs. 500 as penalty for not filling return in time.
5. General expenses include Rs. 5850 as the gift given to friend on his marriage ceremony.

You are required to compute Taxable Income from Business for A.Y. 2023-24 of Mr. Sagar.

Problem 8: -

The following is the profit and loss account for the year ended on 31st march 2023 furnished by Mr.
Rohit.

Particulars Amount Particulars Amount

To Advertisement 18,000 By Gross Profit 4,00,000
To Fire Insurance 8,000 By Bad Debts recovered (Not 16,800
allowed as Deduction earlier)
To Salary 1,50,000 By Gift from mother 60,000
To Office Expenses 10,000 By Interest on bank Deposits 12000
To Depreciation 35,000
To Income Tax 17,000
To Bonus 28,000
To Sales Tax 9,000
To Interest on Bank Loan 11,000
To RDP 7,000
To Net Profit 1,98,000
Total 4,88,800 Total 4,88,800

Other Information: -
 1. Advertisement includes Rs. 1,500 as expenditure incurred on it for selling household
furniture.
2. Salary includes Rs. 9,000 paid to domestic services.
3. Allowable depreciation as per Income Tax Act is Rs. 32,000.
4. Sales Tax includes Rs. 2,500 as per penalty for late filling of returns.

Compute taxable income from business for A.Y. 2023-24

Problem 9: -

The following is the Profit and Loss Account of Raju for the year ended 31st march 2023. Compute his
income from business for A.Y. 2023-24

Particulars Amount Particulars Amount

To Opening Stock 1,15,000 By Sales 8,60,000
To Purchases 1,40,000 By Closing Stock 20,000
To Wages 1,20,000 By Gift from father 27,000
To Rent 1,46,000 By Income tax refund 3,000
To Repairs of Motor Car 13,000
To Wealth tax Paid 12,000
To Medical Expenses 13,000
To General Expenses 1,10,000
To Motor Car 1,30,000
To Provision for Dep. on Motor Car 14,000
To Advance Income Tax Paid 11,000
To profit for year 86,000
Total 9,10,000 Total 9,10,000

Following further information is given: -

1. He carries on his business from rented premises half of which is used as his residence.
2. The use of the car was 3/4th for the business and 1/4th for personal purposes.
3. Medical expenses were incurred during sickness of Mr. Raju for his treatment.
4. Wages include Rs. 12,500 an account of Raju’s driver.
5. As per rules the rate of depreciation on motor car is 15%.

Problem 10: -

Mr. Shoham is the proprietor of a business. His Profit and Loss Account for the year ended on
31/3/2023 are as follows.

Profit & Loss Account

Particulars Amount Particulars Amount

To Establishment 19,600 By Gross Profits 2,49,680
To Rent, Rates & Taxes 15,800 By Interest on Govt. Securities 10,800
To Commission 26,100 By Rent from House Properties 20,700
To Discount & Allowances 3,440
To Provision for Bad Debts 12,400
To Law Charges 13,400
To Gift & Presents to Employee 1,300
To Fire Insurance Premium (for 1,720
Goods)
 To Repairs & Renewals (for 1,960
house)
To Loss on sale of Premium 13,580
To Wealth Tax 11,480
To Interest on Capital 1,700
To Audit Fees 1,600
To Interest on Bank Loan 12,760
To Provision for Depreciation 15,000
To Provision for Income Tax 17,800
To Net Profit 84,480
Total 2,81,180 Total 2,81,180

Other Information: -

1. Bad Debts written-off admitted by income tax department during the year Rs. 1,100.
2. Amount of income tax actually paid during the year is Rs. 8,400.
3. Depreciation allowable as per income tax rules is Rs. 3,400.
4. Advertising expenses include Rs. 1,100 spent on special advertising company to open a new
shop in the market.
5. Law charges are in connection with protection of a trademark.
6. Mr. Shoham carries on his business in a rented premises, half of which is used as his
residence. Rent, rates & taxes includes Rs. 14,800 paid as rent of the premises during the
year.
7. Bank loan is taken for business purposes.

Compute the business taxable income of Mr. Shoham for the Assessment year 2023-24.

Problem 11: -

The following is the trading, profit & loss Account of Mr. Vijay for the year ending 31st March 2023.

Particulars Amount Particulars Amount

To Opening Stock 15,000 By sales 80,000
To Purchases 40,000 By Closing Stock 20,000
To Wages 20,000 By Gift from father 10,000
To Rent 6,000 By Sale of Car 17,000
To Repairs of Car 3,000 By Income Tax Refund 3,000
To Wealth Tax Paid 2,000
To Medical Expenses 3,000
To General Expenses 10,000
To Depreciation of Car 4,000
To Advance Income Tax 1,000
To Profit for the year 26,000
Total 1,30,000 Total 1,30,000

The following further information is given: -

1. Mr. Vijay carries on his business from rented premises half of which is used as his residence.
2. Mr. Vijay bought a car for Rs. 20,000. He charged 20% depreciation on the value of car. The
was sold at the end of the year for Rs. 17,000. The use of car ¾ for the business and ¼ for
personal purpose.
3. Medical expenses were incurred by Mr. Vijay for his treatment.
 4. Wages include Rs. 5,000 on account of Mr. Vijay driver.

Compute his taxable income from business for the year.

Problem 12: -

The following is the Profit & Loss Account for the year ended on 31st march 2023 furnished by Mrs.
Ashwini Shelke.

Profit & Loss Account

Particulars Amount Particulars Amount

To Salary 78,000 By Gross Profit 2,00,000
To Advertisement 8,000 By Sundry Receipts 8,400
To Fire Insurance 3,500 By Bad Debts Recovered (Not 5,400
allowed as deduction earlier)
To Office Expenses 4,500 By Gifts from Father 25,000
To Depreciation 15,800 By interest on Bank Deposits 6,000
To Income Tax 8,600
To Bonus 12,800
To Sales Tax (GST) 4,500
To Interest on Bank Loan 5,600
To R.D.D 3,500
To Net Profit 1,00,000
Total 2,44,800 Total 2,44,800

Other Information: -

1. Salary includes Rs. 4,200 paid to Domestic Servant.

2. Advertisement includes Rs. 550 as expenditure incurred on it for selling household furniture.
3. Allowable depreciation as per Income tax Act is Rs. 18,000.
4. Sales tax includes Rs. 1,300 as penalty for late filing of returns.

Compute his taxable income from business for the year.

Question 13: -

The following is the Receipts and Payments account of medical practitioner for the year ending 31st
March 2023.

Receipts Amount Payments Amount

To Balance b/d 2,10,000 By Clinic Rent 2,50,000
To visiting fees 3,05,000 By Staff salaries 2,00,000
To Consultation fees 2,75,000 By Electricity & Water 12,000
To Sales of Medicines 1,50,000 By Medical Books 6,000
To Sale of Old Equipment at 6,000 By Purchase of Medicines 90,000
book Value
To Operation theatre Rent 1,25,000 By motor Car Expenses 90,000
To Interest & Dividend 25,000 By Audit Fees 40,000
By Staff Welfare expenses 12,000
By Entertainment expenses 8,000
By Surgical equipments 1,60,000
 By Balance C/d 2,28,000
Total 10,96,000 Total 10,96,000

Additional Information: -

1. Depreciation as per Income Tax Rules on Motor Car for professional use Rs. 8,000.
2. One third of Motor Expenses relate to personal use.
3. The rate of depreciation on surgical equipment is 15%. The W.D.V. of equipment brought
forward from earlier was Rs. 43,000.
4. Audit fees include income tax appeal expenses Rs. 6,000

Compute the taxable from profession for the A.Y. 2023-24.