Please explain how manager's commission is charge against profit as it is not provided in case of loss.
Dear Student,
Here is your answer,
Manager is not the partner of the firm therefore his commission is not an appropriation but a charge and charged to Profit and loss account.
And in Profit & Loss Appropriation account only those transactions are recorded which involve partners only and not outsiders
But understand that how manager's commission is calculated? On Net profit .....But if there is no Net profit but a loss therefore how you can provide commission on it?
Conclusion: Manager commission is a charge and only provided when there is a Net profit.
Regards
Here is your answer,
Manager is not the partner of the firm therefore his commission is not an appropriation but a charge and charged to Profit and loss account.
And in Profit & Loss Appropriation account only those transactions are recorded which involve partners only and not outsiders
But understand that how manager's commission is calculated? On Net profit .....But if there is no Net profit but a loss therefore how you can provide commission on it?
Conclusion: Manager commission is a charge and only provided when there is a Net profit.
Regards