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8/7/2019 Profit & Tax Planning
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8/7/2019 Profit & Tax Planning
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Profit & Tax planning
Profit planning is the process of anticipating profits,
deciding profit targets. Cost-volume profit analysis
examines the relationship of cost and profits to thevolume of business to maximize profits.
Definition: According to Heiser
³The most significant single factor in profit planning
of the average business is the relationship between
the volume of business costs and profits´
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Factor affecting profit of small
enterprise
Volume of fluctuations: Higher the volume of sale, greater
will be the profit.
Change in fixed cost: it change the break even point butnot the marginal profit.
Change in Variable cost: it changes both the break even
point and the marginal profit.
Change in Selling price: it changes the break even point
and the marginal profit.
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Techniques of profit planning
Break-even analysis
Ratio AnalysisBudgetary Control
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Break-even analysis
It is known as cost-volume-profit analysis. It
determines relationship between costs, prices,
sales volume, and profits. If volume isincreased the cost per unit will came down
and profit per unit will increase.
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Ratio Analysis
Ratio indicating profitability which are
calculated on the basis of profit & loss A/C
and balance sheet. Which show operating
efficiency , productivity or effective use of
resources.
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Budgetary Control
The word budget is derived from a French term
¶Bougette· which refers to a leather pouch in which
funds are appropriate for meeting anticipatedexpenses.
Budget is an estimate of future needs arranged
to an orderly basis, covering some or allactivities of an enterprise for definite period of
time,
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Tax planning
Taxation system in a country aims at raising of
resources, reducing inequalities in different
income categories at the time facilitating thepromotion of the interest of industrial sector of
the country.
Small scale units deserve to be givenpreferential treatment while framing taxation
policy.
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Status of the tax- payee
The status of the entrepreneur play an
important role in the tax planning. The status
refers to the legal and residential status.
A. Legal Status:
1. Individual2. Hindu undivided family
3. Company-Proprietorship
(a) manufacturing
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(b) Service
(c) Trading(d) Consultancy
4. Partnership firm
5. Association of personsB. Residential status
Resident
Resident but not ordinary resident
Non- resident Indians.
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The rate of taxes, exemption anddeduction vary as per the legal andresidential status of the entrepreneur.
Therefore, entrepreneur should decideand mention their status while taxplanning.
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Thanks