Why cant we deduct remuneration to employees from each year?


 

Dear Student,

You can either deduct the remuneration from the weighted average profits (only once) or you can also deduct the remuneration from each year's profit separately. Both the ways are going to give you the same result.

One alternative is already shown on our website under the textbook solutions. Other alternative is shown below.
 

(1,25,000-60,000) 65,000	1	65,000
(1,40,000-60,000) 80,000	2	1,60,000
(1,20,000-60,000) 60,000	3	1,80,000
(1,90,000-60,000) 1,30,000	4	5,20,000
(1,90,000-60,000) 1,30,000	5	6,50,000
Total	15	15,75,000

$\mathrm{Weighted} \mathrm{Average} \mathrm{Profits}=\frac{15,75,000}{15}=1,05,000$