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Illustration 3 The partners of Maltri Agencies decided to convert the partnership into a private limited company called MA (P) Ltd. with effect from 1st January, 2005. The consideration was agreed at Rs. 1,17,00,000 based on the firm's Balance Sheet as at 31st December, 2004. However, due to some procedural difficulties, the company could be incorporated only on 1st April, 2005. Meanwhile the C18 with interest at 12% per annum. The same books of account were continued by the company which closed its account for the first time on 31st March, 2006 and prepared the following summarized profit and loss account. Rs. Sales 2,34,00,000 Cost of goods sold 1,63,80,000 Salaries 11,70,000 Depreciation 1,80,000 Advertisement 7,02,000 Discounts 11,70,000 Managing Director's remuneration 90,000 Miscellaneous office expenses 1,20,000 Office-cum-show room rent 7,20,000 Interest 9,51.000 2,1483,000 Profit 19,17,000 The company's only borrowing was a loan of Rs. 50,00,000 at 12% p.a. to pay the purchase consideration due to the firm and for working capital requirements. The company was able to double the average monthly sales of the firm, from 1st April, 2005 but the salaries trebled from that date. It had to occupy additional space from 1st July, 2005 for which rent was Rs. 30,000 per month. Prepare a profit and loss account in a columnar form apportioning cost and revenue between pre incorporation and post-incorporation periods. Also, suggest how the pre-incorporation profits are to be dealt with

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