{"id":1293,"date":"2019-06-16T15:39:44","date_gmt":"2019-06-16T15:39:44","guid":{"rendered":"https:\/\/commerceiets.com\/?p=1293"},"modified":"2019-06-16T15:39:44","modified_gmt":"2019-06-16T15:39:44","slug":"profit-and-loss-appropriation-account","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/profit-and-loss-appropriation-account\/","title":{"rendered":"PROFIT AND LOSS APPROPRIATION ACCOUNT"},"content":{"rendered":"\n<p>Profit and loss Appropriation account is an extension of Profit and Loss account. All the appropriations i.e. the distributions payable to the partners as per <a href=\"https:\/\/commerceiets.com\/partnership-deed\/\">partnership deed<\/a> are recorded in this account.<\/p>\n\n\n\n<p>This account is credited with the amount of net profit and\ndebited with the amount of net loss.<\/p>\n\n\n\n<p>The debit side of this account records: <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Interest on Capital<\/li><li>Salary, Fees, Commission, Bonus etc.<\/li><li>Transfer to Reserves<\/li><li>Distribution of profit among partners<\/li><\/ul>\n\n\n\n<p>The credit side of this account records: <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Interest on drawings<\/li><li>Distribution of loss among partners.<\/li><\/ul>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_72 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/commerceiets.com\/profit-and-loss-appropriation-account\/#FEATURES_OF_PROFIT_AND_LOSS_APPROPRIATION_ACCOUNT\" title=\"FEATURES OF PROFIT AND LOSS APPROPRIATION ACCOUNT\">FEATURES OF PROFIT AND LOSS APPROPRIATION ACCOUNT<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/commerceiets.com\/profit-and-loss-appropriation-account\/#PURPOSE_OF_PROFIT_AND_LOSS_APPROPRIATION_ACCOUNT\" title=\"PURPOSE OF PROFIT AND LOSS APPROPRIATION ACCOUNT\">PURPOSE OF PROFIT AND LOSS APPROPRIATION ACCOUNT<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/commerceiets.com\/profit-and-loss-appropriation-account\/#PROFIT_AND_LOSS_ACCOUNT\" title=\"PROFIT AND LOSS ACCOUNT\">PROFIT AND LOSS ACCOUNT<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/commerceiets.com\/profit-and-loss-appropriation-account\/#FEATURES_OF_PROFIT_AND_LOSS_ACCOUNT\" title=\"FEATURES OF PROFIT AND LOSS ACCOUNT\">FEATURES OF PROFIT AND LOSS ACCOUNT<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/commerceiets.com\/profit-and-loss-appropriation-account\/#DIFFERENCE_BETWEEN_PROFIT_AND_LOSS_ACCOUNT_PROFIT_AND_LOSS_APPROPRIATION_ACCOUNT\" title=\"DIFFERENCE BETWEEN PROFIT AND LOSS ACCOUNT &amp; PROFIT AND LOSS APPROPRIATION ACCOUNT\">DIFFERENCE BETWEEN PROFIT AND LOSS ACCOUNT &amp; PROFIT AND LOSS APPROPRIATION ACCOUNT<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/commerceiets.com\/profit-and-loss-appropriation-account\/#DIFFERENCE_BETWEEN_CHARGE_AGAINST_PROFIT_AND_APPROPRIATION_OF_PROFIT\" title=\"DIFFERENCE BETWEEN CHARGE AGAINST PROFIT AND APPROPRIATION\nOF PROFIT\">DIFFERENCE BETWEEN CHARGE AGAINST PROFIT AND APPROPRIATION\nOF PROFIT<\/a><\/li><\/ul><\/nav><\/div>\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FEATURES_OF_PROFIT_AND_LOSS_APPROPRIATION_ACCOUNT\"><\/span>FEATURES OF PROFIT AND LOSS APPROPRIATION ACCOUNT <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Profit and Loss Appropriation account is prepared in accordance with the partnership deed. The features of Profit and Loss Appropriation Account are as follows:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Prepared after preparing Profit and Loss Account.<\/li><li>It is prepared for the appropriations or distributions among the partners.<\/li><li>Not required as per the provisions of Income Tax Law.<\/li><li>Prepared in accordance with the provisions of partnership deed.<\/li><li>Reserves required for the future are created from this account.<\/li><li>It is prepared by only <a href=\"https:\/\/commerceiets.com\/partnership-business\/\">partnership<\/a> firms.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"PURPOSE_OF_PROFIT_AND_LOSS_APPROPRIATION_ACCOUNT\"><\/span>PURPOSE OF PROFIT AND LOSS APPROPRIATION ACCOUNT  <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>To know the distribution of profit among\npartners.<\/li><li>To show how much is payable to partners in the\nform of salary, bonus, fees, commission , interest on capital etc. these all\nare debited to Profit and Loss Appropriation Account.<\/li><li>To show interest on drawings at the debit side\nof the Profit and Loss Appropriation Account.<\/li><li>To create reserve from the profits for future.<\/li><li>To distribute the profits among the partners in\nprofit ratio.<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"960\" height=\"720\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Slide4.jpg\" alt=\"\" class=\"wp-image-1303\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Slide4.jpg 960w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Slide4-300x225.jpg 300w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Slide4-768x576.jpg 768w\" sizes=\"auto, (max-width: 960px) 100vw, 960px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"PROFIT_AND_LOSS_ACCOUNT\"><\/span> PROFIT AND LOSS ACCOUNT<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It is an account which shows the Net Profit or Net Loss for the year. It is prepared after preparing Trading Account. The particulars required for preparation of profit and loss account are available from the trial balance only. <\/p>\n\n\n\n<p>This account starts from the result of trading account only.\nThe Gross Profit is shown on the credit side and Gross Loss is shown on the\ndebit side of Profit and Loss Account.<\/p>\n\n\n\n<p>The debit side of this account records all the indirect expenses like: <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Office and Administrative Expenses<\/li><li>Selling and Distribution Expenses<\/li><li>Financial and Other Expenses<\/li><\/ul>\n\n\n\n<p> The credit side of this account shows all the indirect incomes like: <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Interest received<\/li><li>Rent received<\/li><li>Discount received<\/li><li>Dividend received<\/li><li>Provision for discount on creditors<\/li><\/ul>\n\n\n\n<p>If there is debit side more than credit side the result will be Net Loss and if the credit side is more than debit side then the result will be Net Profit.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FEATURES_OF_PROFIT_AND_LOSS_ACCOUNT\"><\/span>FEATURES OF PROFIT AND LOSS ACCOUNT<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>This account is prepared on last day of an\naccounting year to determine the net result of the business.<\/li><li>It is second stage of final accounts.<\/li><li>It is prepared after preparing Trading Account.<\/li><li>Only indirect expenses and indirect incomes are\nshown in this account.<\/li><li>It starts with the closing balance of the\ntrading account i.e. Gross Profit or Gross Loss.<\/li><li>All items of revenue concerning current year-\nwhether received in cash or not- and all items of expenses- whether paid in\ncash or not-are considered in this account. But no item related to past or next\nyear is included in it.<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"960\" height=\"720\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Slide7.jpg\" alt=\"\" class=\"wp-image-1305\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Slide7.jpg 960w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Slide7-300x225.jpg 300w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Slide7-768x576.jpg 768w\" sizes=\"auto, (max-width: 960px) 100vw, 960px\" \/><\/figure>\n\n\n\n<p> <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"DIFFERENCE_BETWEEN_PROFIT_AND_LOSS_ACCOUNT_PROFIT_AND_LOSS_APPROPRIATION_ACCOUNT\"><\/span>DIFFERENCE BETWEEN PROFIT AND LOSS ACCOUNT &amp; PROFIT AND LOSS APPROPRIATION ACCOUNT<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<table class=\"wp-block-table has-subtle-light-gray-background-color has-background is-style-stripes\"><tbody><tr><td> <strong>  BASIS OF DIFFERENCE   <\/strong><\/td><td><strong>   PROFIT AND LOSS ACCOUNT   <\/strong><\/td><td><strong>   PROFIT AND LOSS APPROPRIATION ACCOUNT   <\/strong><\/td><\/tr><tr><td>\n  STAGE OF PREPARATION\n  <\/td><td>\n  It is prepared after trading account and hence starts with gross\n  profit or gross loss.\n  <\/td><td>\n  It is prepared after profit and loss account and hence starts with\n  the net profit or net loss.\n  <\/td><\/tr><tr><td>\n  OBJECTIVE\n  <\/td><td>\n  It is prepared to ascertain net profit or net loss.\n  <\/td><td>\n  It is prepared to distribute the net profit of the year among the\n  partners.\n  <\/td><\/tr><tr><td>\n  NATURE OF ITEMS\n  <\/td><td>\n  Expenses debited to this account are charge against profits.\n  <\/td><td>\n  Items debited to this account are appropriation of profits.\n  <\/td><\/tr><tr><td>\n  PARTNERSHIP DEED OR AGREEMENT\n  <\/td><td>\n  This account is not prepared on the basis of partnership agreement or\n  deed, except for interest on loan from partners.\n  <\/td><td>\n  This account is prepared on the basis of partnership deed or\n  agreement.\n  <\/td><\/tr><tr><td>\n  MATCHING PRINCIPLE\n  <\/td><td>\n  Matching principle is followed while preparing this account.\n  <\/td><td>\n  Matching principle is not followed while preparing this account.\n  <\/td><\/tr><tr><td>\n  RECORDING ON DEBIT SIDE\n  <\/td><td>\n  All indirect expenses like office and administrative expenses,\n  selling and distribution expenses, financial and other expenses are recorded\n  on the debit side of this account.\n  <\/td><td>\n  All the appropriations like Interest on capital, salaries, fees,\n  commission, bonus, transfer to reserve etc. are recorded on the debit side of\n  this account.\n  <\/td><\/tr><tr><td>\n  RECORDING ON CREDIT SIDE\n  <\/td><td>\n  All indirect incomes like:\n  Interest received, Rent received, Discount received, Dividend\n  received etc. are recorded on credit side of this account.\n  <\/td><td>\n  The net profit, interest on drawings, divisible profits are recorded\n  on the credit side of this account.\n  <\/td><\/tr><tr><td>\n  INCOME TAX\n  <\/td><td>\n  For income tax calculation the profit and loss account is the basis.\n  <\/td><td>\n  No use of this account for income tax purposes.\n  <\/td><\/tr><tr><td>\n  PREPARED BY\n  <\/td><td>\n  This account is prepared by all kind of business organizations.\n  <\/td><td>\n  This account is prepared by partnership firms only.\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"DIFFERENCE_BETWEEN_CHARGE_AGAINST_PROFIT_AND_APPROPRIATION_OF_PROFIT\"><\/span>DIFFERENCE BETWEEN CHARGE AGAINST PROFIT AND APPROPRIATION\nOF PROFIT<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<table class=\"wp-block-table has-subtle-light-gray-background-color has-background\"><tbody><tr><td><strong>   BASIS OF DIFFERENCE   <\/strong><\/td><td><strong>   CHARGE AGAINST PROFIT   <\/strong><\/td><td><strong>   APPROPRIATION OUT OF PROFITS   <\/strong><\/td><\/tr><tr><td>\n  NATURE\n  <\/td><td>\n  It indicates expenses to be deducted from profits while calculating\n  the net profit or loss.\n  <\/td><td>\n  It indicates distribution of net profits to various heads.\n  <\/td><\/tr><tr><td>\n  RECORDING\n  <\/td><td>\n  It is debited to Profit and Loss Account.\n  <\/td><td>\n  It is debited to Profit and Loss Appropriation Account.\n  <\/td><\/tr><tr><td>\n  NECESSARY OR NOT\n  <\/td><td>\n  It is necessary to make charges against profits if there is loss.\n  <\/td><td>\n  Appropriations are made only when there is profit.\n  <\/td><\/tr><tr><td>\n  EXAMPLE\n  <\/td><td>\n  Interest on partner\u2019s loan and rent paid to a partner.\n  <\/td><td>\n  Interest on capital, Partner\u2019s Salary etc.\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p> <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Profit and loss Appropriation account is an extension of Profit and Loss account. All the appropriations i.e. the distributions payable to the partners as per partnership deed are recorded in this account. This account is credited with the amount of net profit and debited with the amount of net loss. The debit side of this&#8230;<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/profit-and-loss-appropriation-account\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;PROFIT AND LOSS APPROPRIATION ACCOUNT&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":1300,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19,21],"tags":[27,28,29],"class_list":["post-1293","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-12-accountancy","category-partnership-accounts","tag-difference-between-charge-against-profit-and-appropriation-of-profit","tag-difference-between-profit-and-loss-account-profit-and-loss-appropriation-account","tag-profit-and-loss-account"],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/1293","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=1293"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/1293\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/1300"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=1293"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=1293"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=1293"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}