Write the difference between profit and loss appropriation account and profit and loss adjustment account?
Answers
Profit and loss appropriation account help summarize all income and expenditure appropriated from profit and loss. It is an extension of profit and loss account. It is important for businesses to have a profit and loss appropriation account while
Profit and loss adjustment account is made to detect and correct errors made in previous profit and loss accounts. The main purpose of profit and loss adjustment account is to ascertain the true profit and loss of an organization.
Profit and Loss Appropriation Account is necessary for businesses,especially partnerships because they help to allocate the net of expenditures and incomes among various partners. It is a special account made after normal profit and loss account to show the distribution of profits and losses.
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Profit and loss Adjustment Account is prepared to record those transactions or omissions and errors which were left while preparing the final accounts and they are found after the final accounts have been prepared and the profits are distributed among the partners.