If increase in retained earning = Rs. 6,00,000
Preliminary expense = Rs. 10,000
Provision for taxation = Rs. 60,000
Transfer to General reserve = Rs. 10,000
Net profit before taxation = ??
A. Rs. 6,40,000
B. Rs. 6,80,000
C. Rs. 6,70,000
D. Rs. 6,20,000
Answer: Option D
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Calculate the Net Profit Before Taxation
Substitute the given values into the formula:
Increase in retained earning = Rs. 6,00,000
Preliminary expense = Rs. 10,000
Provision for taxation = Rs. 60,000
Transfer to General reserve = Rs. 10,000
Net Profit Before Taxation = Rs. 6,00,000 + Rs. 10,000 + Rs. 60,000 + Rs. 10,000
Net Profit Before Taxation = Rs. 6,80,000
Answer:
The Net Profit Before Taxation is Rs. 6,80,000. This corresponds to option B.
Why the provision for the Taxation has not been added back to retained earnings?