Difference between charge against profit and appropriation of profit
Answers
Depreciation fund is a reserve, but is a charge against profit since it is created for replacement of an asset. ... Proposed dividend is a provision, but is an appropriation out of profits, and not a charge to profit and loss account as in the case of provision for doubtful debts.
Answer!!
Difference between Charge Against Profit and Appropriation of Profit:-
→ Charge against profit is an expense, hence, deducted from the revenue to determine net profit or net loss for the year. Appropriation of Profit means distribution of net profit for the year among partners under different heads as per the Partnership Deed.
→ Charge Against Profit is debited to Profit and Loss Account. Appropriation of Profit is debited to Profit and Loss Appropriation Account.
→ Charge Against Profit is allowed before Appropriation of Profit. Appropriation of Profit is appropriated after accounting of all charges.
→ Examples of Charge Against Profit are rent paid to a partner, interest on loan by partner, etc. Examples of Appropriation of Profit are salary to partners, interest on capital, etc.