A partnership firm debit salary and commission of partners to the profit and loss appropriation account. Partners argues that it should be debited to profit and loss account. Who is right in this situation?

Firm

The correct answer is option 2- Firm.

The firm is right as salary and commission is an appropriation of profit which is debited to 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.