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What is the difference between profit and loss A/C and profit and loss appropriation A/c?????

 

Differences between Profit and Loss account and Profit and Loss Appropriation

account1. Profit and loss account is prepared for recording expenses, losses, and gains ofthe current uear, whereas profit and loss appropriation acount is prepared for recordingthe appropriation of profit i.e how the profits are utilized for various purposes such aspayment of dividend, etc.2. Profit and Loss account is always prepared whereas the profit and lossappropriation account is prepared only when there is appropriation of profits.3. The balance of profit and loss accounti.e net profit or loss is transfered toprofit and loss appropriation account. On the other hand the balance of Profit and LossAppropriation account is carried forward from year to year.4. Profit and loss accunt discloses the net profit or net loss before appropriationwhereas the closing balance of profit and loss appropriation account represents net profit or net loss afterappropriation.

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Profit and loss appropriation account shows the distribution of net profit amongst the shareholders in the form of dividend and transfer of profit to various reserves and issue of bonus share. profit and loss appropriation account is prepared after the preparation of profit and loss account. Profit and loss account provides the information about adjustment relating to last year. Profit and loss appropriation account also provides the information about the appropriation of dividend out of available profit. Profit and loss appropriation account is prepared after profit and loss account and before the preparation of balance sheet. Profit and loss appropriation account is a vital item of final account
 
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P&L A/c is prepared to know the results for the current financial year. The purpose is to measure the performance of business in terms of Profit-Loss. So, by the means of this A/c, we comes to know whether we have made Profit during the current year or Loss.

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P&L Appropriation A/c shows the appropriation of profit. Actually, it means how the Profit (as determined through P&L A/c) is used by the enterprise. So, this A/c doesn't include any item of income or expense which affect the Profit/Loss itself (these items are shown in the P&L A/c).

In the case of a Partnership Firm, it shows Partners' Salaries/Commissions, Interests on Capitals/Drawings, Reserves created from out of profits, remaing profit distribution among Partners, and like items.

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