Income From Business: (A Quick Introduction)
Income From Business: (A Quick Introduction)
Income From Business: (A Quick Introduction)
(A quick introduction)
Types of Businesses (The Scope)
Exclusively Identified Businesses under Income Tax Ordinance:
1. Income Received Against Lease
2. Income From Mutual Funds
Deductions
1. Admissible Deductions 2. Deductions not Admissible
( Allowed) ( )
Group A: Expenses incurred for the purpose of Business
Group B: Depreciation and Amortization of Assets
Group C: Amalgamation Expenses incurred by an Amalgamated Company
Specimen of General Purpose Income Statement
Hussain & Brothers
Income Statement
For The Year Ended June 30, 2014
Sales 1000
Sales Return (10) 990
Cost of Sale: (390)
Gross Profit 600
Administrative Expenses:
Salaries xxx
Wages xxx
Depreciations xxx
Amortizations xxx
Rent xxx (100)
Marketing Expenses:
Advertisement xxx
Entertainment xxx (50)
Financial Cost xxx (50)
Operating Profit / Profit before Tax 400
Tax (35%) (140)
Profit after Tax 260
Exercises:
(Extracts from Trail Balance) Rs. 000
Components
Group
A
Group
B
Group
C
Sales 40000 20000 22000 31500 350000 70000
Sales Returns --- 50 70 25 ---- ----
Cost of Sales 3000 400 10000 15500 20000 40000
Salaries 1000 2500 500 1200 1500 3600
Rent 5000 200 6000 1400 5000 15000
Wages 100 100 --- 1335 2000 1500
Utility Bills 1500 500 200 1100 2000 4600
Sales Promotional
Expenditures
500
Nil
Nil
200
1000
800
Payment for Foreign
Travel (private)
200
Nil
100
130
800
1600
Advertisement
Expenses
500
200
150
270
100
1550
School fee of
children
100
100
113
226
200
1000
Personal Motor
Repair
80
120
110
117
160
240
Depreciation of van
partially used in
business (1:1)
---
---
350
517
500
800
Amortization of
Patents
---
---
80
120
30
40
Impairment of
Goodwill
---
---
40
75
70
30
Amalgamation
Expenses
---
---
---
---
1000
1100
Often used Withholding Payments
Heads Amount Tax (Deductions) Net Payment
Salary 1000,000/- e.g., 70,000/-
(based on given
slab)
930,000/-
Rent 700,000/- e.g., 40,000/-
(based on given
slab)
640,000/-
Brokerage /
Commission
40,000/-
(Fixed Rate)
10%
36,000/-
Prize Bonds
100,000/-
(Fixed Rate)
15%
85,000/-
Prize and Awards
(e.g., Sales
promotion)
200,000/-
(Fixed Rate)
20%
160,000/-
Payment of Goods
/ Supplies:
To Company
To Non Company
100,000/-
100,000/-
(Fixed Rate)
If payments in a year
exceeds Rs. 25,000/-
3.5%
4% (from 2013-14)
96,500/-
96,000/-
Payment of
Services:
To Company
To Non Company
100,000/-
100,000/-
(Fixed Rate)
If payment in a year
exceeds Rs. 25,000/-
6%
7% (from 2013-14)
94,000/-
93,000/-
Bank Withdrawals
100,000/-
(Fixed Rate)
If payment in a year
exceeds Rs. 50,000/-
.03% (from 2013-14)
(in this case bank pay
you full amount but
deduct tax from your
account balance)
100,000/-