Sunil Jalan
I would like to know regarding 25% transfer of profit to reserve fund.
Our society has to carry forward loss of last year and this year they have made profit. The society has adjusted the whole profit of this year against the loss of last year and still it is in the loss. What I want to know is that if there is loss in last year can they adjust the whole profit in it are they not liable to transfer 25% to reserve fund and then adjust the balance against last year’s loss.
I will be great full if you guide me.
I C Naik
A good Question.
Rule 49(A) of the MCR 1961 lists out items to be deducted to calculate net profit after arriving at gross profit (In case of Non-Profit cooperative societies Profit MEANS an excess of income over expenditure).
Sub-Section 1 gives list of (i) to (xvii) nature of expenses. Sub-Section 2 lists further 3 items to be deducted in which item 3 gives a clue to your question (which is very good question), (in the absence of express provision). It reads as under:
(3) The net profit thus arrived at together with the amount of profits brought forward from the previous year shall be available for appropriation.]
Loss is negative connotation of profit. Here the intention is Income and Expenditure Account to be prepared at the end of every year as required under Section 65 of the MCS Act 1960, must recognize brought forward amount of Profit (Excess of Income), (or loss as the case may be) while computing amount available for appropriation.