Practicing Success
The profit which is distributed between partners is calculated by preparing...........................account. |
Profit and loss Profit and loss Appropriation Trading Capital |
Profit and loss Appropriation |
In a sole proprietorship, the profit or loss calculated in the profit and loss account is transferred to the proprietor's capital account. However, in a partnership, additional adjustments need to be made, such as interest on drawings, interest on capital, partner salaries, and partner commissions. To facilitate these adjustments, it is customary to prepare a Profit and Loss Appropriation Account for the firm. This account helps determine the final amount of profit or loss to be distributed among the partners based on their agreed profit-sharing ratio. |