Question

. Appropriation of salaries to partners and interest on partners’ capital accounts when the result of P&L A/c is net loss
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Answer 1

The purpose of the partnership appropriation account is to permit adjustments to be made to net income from the profit and loss account before the distribution of any residual earnings is formed to the partner capital accounts.

Explanation:

• The purpose of the partnership appropriation account is to permit adjustments to be made to net income from the profit and loss account before the distribution of any residual earnings is formed to the partner capital accounts.

• The adjustments embody such things as partner salaries and interest on partner capital, loans, and drawings accounts.

• Profit and loss appropriation account is used to distribute profit among partners within the case of the partnership business.

• The net profit as shown by the profit and loss account of a partnership firm desires sure changes with reference to interest on drawings, interest on capitals, salary/commission to the partners, if provided, under the agreement