difference between charge against profit and charge on profits?????
There is no difference between Charge against Profits and Charge on Profits. In fact both are same. However, there is a difference between Charge against Profit and Appropriation of Profits. The difference between the two is given below.
Basis of Difference | Charge against/on Profits | Appropriation of Profits |
Meaning | This implies deduction of expenses from the profits in order to compute net profit/net loss during the accounting year. | This implies distribution of available net profits left out after providing all expenses. |
Compulsion | It is a compulsory or mandatory obligation that a firm has to bear. | It is not compulsory in nature. |
Situation | It is provided under all circumstances- irrespective of profits or losses. | It is provided only in case a firm has profits (and not in case of losses). |
Relevant Accounts | It is recorded (debited to) the Profit and Loss Account. | It is recorded (debited to) the Profit and Loss Appropriation Account. |
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. |