From the following information calculate Net Profit Before Tax and Extra Ordinary items.
| Particulars | 2021 Amount in ₹ |
2020 Amount in ₹ |
| Equity Share Capital | 10,00,000 | 10,00,000 |
| 10% Preference Share Capital | 5,00,000 | 5,00,000 |
| Balance in Statement of Profit and Loss | 6,20,000 | 3,00,000 |
| Proposed Dividend (Equity Share Capital) |
2,60,000 | 2,20,000 |
Answer & explanation
Correct answer: option 1
The correct answer is option 1- ₹5,90,000.
CALCULATION OF NET PROFIT BEFORE TAX AND EXTRAORDINARY ITEMS-
Balance in Statement of Profit and Loss in 2021 = 6,20,000
Less: Balance in Statement of Profit and Loss in 2020 = 3,00,000
= (6,20,000 - 3,00,000)
= 3,20,000
Add: Proposed dividend of the year 2020 = 2,20,000
= (3,20,000 + 2,20,000)
= 5,40,000
Add: Dividend paid on preference capital = 50,000
= (5,40,000 + 50,000)
= 5,90,000
* Preference share dividend is paid after that equity share dividend is proposed. So, preference dividend (5,00,000 x 10/100 = 50,000 is also added back.
* Proposed dividend of the previous year is added back as it is paid in the current year and shown as cash outflow under the financing activity.
* Proposed dividend of the current year has no effect on the cash flow statement in the current year. It is paid in the next year after approval at shareholder's meeting.