Question

Which of the following are appropriation profit? 1. Rent 2.salary 3.interest on loan 4.interest on capital

Answer 1

Answer:

interest on capital are the appropriation of profits

Answer 2

4.Interest on capital is not appropriation profit

Definition:

• Profit and loss appropriation account is opened to expose the distribution of internet earnings a number of the companions.
• It is an extension of earnings and loss account.
• Profit and loss appropriation account is debited with objects which might be appropriation of profits.
• An appropriation of earnings is the distribution of internet earnings

Interest on capital:

• A Profit and loss Appropriation account is an account which is ready after earnings and loss account and is commonly organized through partnership corporations for distribution/allocation of earnings earned through the corporation to companions.
• Only objects regarding companions might be entered in Profit and loss Appropriation like interest on capital, profit, interest on drawings, salary/commission to companions.

Explanation for incorrect options:

1. Rent 2.salary 3.interest on loan:All these options does falls under profit appropriation as it has to be included in the list before making profit appropriation.

Thus,4.Interest on capital is not appropriation profit