Question

explain the concept of profit and loss appropriations a/c

Answer 1

Profit and Loss Appropriation Accounts are made by the particular firm for recognizing whether it is gaining profit or bearing. It also helps in distributing the annual profit and Loss in appropriate amount among it's partners in their profit and loss sharing ratio. The profit and loss appropriation accounts are set up like other general ledgers. It usually consists of a debit column and a credit column. The debits include items such as the funds that are transferred back to the general profit and loss account at the end of the accounting period.


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Answer 2

By definition, a P&L appropriation account is used to demonstrate division or allocation of profit/losses among the owners. P&L account is used to determine Net Profit or Net Loss of an organization for a given accounting period. ... P&L appropriation account is prepared mainly by partnership firms.

 profit and loss appropriation account should be treated as a separate account from the profit and loss account. The appropriation account is designed to provide an indication of how profit transferred from the profit and loss account is spent. Appropriations are generally placed into one of four broad categories: funds designated for removal by partners, capital reserves, reserves earmarked to improve capital and surplus funds to be carried into the next accounting period.