PROFIT AND LOSS APPROPRIATION ACCOUNT

THE MAIN REASON TO CREATE PROFIT AND LOSS APPROPRIATION ACCOUNT IS TO SHOW THE DISTRIBUTION OF PROFIT AMONG PARTNERS.

EVERY ITEM WHICH IS A LOSS TO THE FIRM GOES TO THE DEBIT SIDE AND ITEMS WHICH ARE INCOME FOR THE FIRM GOES TO THE CREDIT SIDE OF PROFIT AND LOSS APPROPRIATION ACCOUNT.

DR. SIDE ITEMS:- INTEREST OF CAPITAL, COMMISSION, SALARY, RESERVE.
CR. SIDE ITEMS:- NET PROFIT(BALANCE OF P&L APPROPRIATION)INTEREST ON                                               DRAWING.
BALANCE AMOUNT WILL BE DISTRIBUTED AMONG PARTNERS.

NOTE 1):- EVERY ITEM, WHICH IS CHARGE AGAINST PROFIT(EXPENSE RELATED TO THE PROFIT AND LOSS A/C) SHOULD BE LESS FROM THE NET PROFIT FIRST. AFTER THAT IT SHOULD BE TRANSFER TO PROFIT AND LOSS APPROPRIATION ACCOUNT.

NOTE 2):- IF ANY PARTNER GIVES LOAN TO THE FIRM AND INTEREST RAISE ON THIS LOAN. SINCE INTEREST ON LOAN IS CHARGE AGAINST PROFIT, IN THIS CASE INTEREST ON LOAN SHOULD LESS FROM NET PROFIT THEN IT SHOULD BE TRANSFER TO PROFIT AND LOSS APPROPRIATION ACCOUNT.



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