Accountancy Part AAccounting for Partnership

Select the account that is prepared to ascertain the final figure of…

Select the account that is prepared to ascertain the final figure of Profit and Loss to be distributed among the partners in case of a partnership firm.

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Profit and Loss Appropriation Account

The Profit and Loss Appropriation Account starts with the net profit of the Profit and Loss Account and adjusts interest on capital, partners' salary and commission and interest on drawings, to arrive at the final profit divided among the partners.

Option (1) Profit and Loss Account — Incorrect. It finds the net profit of the business before appropriations to partners.

Option (3) Revaluation Account — Incorrect. It records changes in assets and liabilities on reconstitution.

Option (4) Realisation Account — Incorrect. It is prepared on dissolution of the firm.

NCERT (2026-27 edition):
Profit and Loss Appropriation Account – “Profit and Loss Appropriation Account is merely an extension of the Profit and Loss Account of the firm. It shows how the profits are appropriated or distributed among the partners. All adjustments in respect of partner’s salary, partner’s commission, interest on capital, interest on drawings, etc. are made through this account. It starts with the net profit/net loss as per Profit and Loss Account.”