Which of the following account / statement is prepared to distribute the profit or loss among partners?

Profit and Loss Appropriation A/c

The correct answer is option 1- Profit and Loss Appropriation A/c.

Profit and Loss Appropriation A/c is prepared to distribute the profit or loss among partners.

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. Journal entries for the Share of Profit or Loss after appropriations:

(a) If Profit: Profit and Loss Appropriation A/c To Partner’s Capital/Current A/c’s (individually)

(b) If Loss: Partner’s Capital/Current A/c (individually) To Profit and Loss Appropriation A/c