Question

Distinguish between charge against profit and appropriation of profit ​

Answer 1

Answer:

.

...

Basis of Difference Charge against/on Profits Appropriation of Profits

Effect It affects net profit. It does not net profit.

Accounting Order It is done before all appropriations of items. It is done after all charges of items.

4 more rows•Mar 25, 2016

Answer 2

Answer :

• Charge Against Profit is Provisions

• Appropriation of Profit is Reserves

⋆ Provisions -

Provisions are the amount set aside out of Profit to provide for

i ) Depreciation or renewals

ii ) Any known liabilitiy of which the amount cannot be determined with substantial accuracy.

⋆ Reserves -

Reserves is that part of profit of the business which is set aside or retained in the business future use.

Difference Between Provisions and Reserves :

⊛ Provisions

• It is created for meeting a known liabilitiy

• The purpose is to meet a specific future loss

• It is a charge against Profit

• It is compulsory

• It cannot be used for dividend distribution

⊛ Reserves

• It is created for meeting an unknown liabilitiy

• To strengthen the financial purpose of business

• It is an appropriation of Profit

• It is not compulsory

• It can be used for dividend distribution