Accountancy Part AAccounting for Partnership

The Profit and Loss Appropriation Account is merely an extension of t…

The Profit and Loss Appropriation Account is merely an extension of the Profit and Loss Account of the firm, which, among the following, is not shown in the Profit and Loss Appropriation Account?

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → All adjustments in respect of payment to Vendor.

The Profit and Loss Appropriation Account shows how the net profit is distributed among the partners: salary, commission, interest on capital, interest on drawings and the final share of profit. A payment to a vendor is a business transaction with an outsider, so it has no place in this account.

Option (1) All adjustments in respect of partner’s salary. — Shown in the account. A partner’s salary is an appropriation of profit.

Option (3) All adjustments in respect of interest on capital — Shown in the account. It is debited to the appropriation account.

Option (4) All adjustments in respect of interest on drawings — Shown in the account. It is credited to the appropriation account as income from partners.

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.”