PROFIT AND LOSS APPROPRIATION ACCOUNT

Transaction of the partnership are recorded according to the double entry system of accounting.For recording the transactions the procedure followed is similar to that of the sole proprotoship. Staring from journal , cash book and other subsidiary books Viz. Purchases books sales books etc. Ledger and trail balance are prepared to know about the profitabilty and financial position of the business. Till here there is a is no diffrence between the accounts of a sole proprietor and a partnership firm. Now the question arise that how to divide the profit or losses among the partners and how to make other appropriations like salary,commission,interst on capital etc.

So after making the profit and loss account of a partnership firm the next step is to divide the profits or losses among the partners and to make other appropriations like interest in capital, salary, commission, etc For this purpose an other account is prepared profit and loss appropriation account.

This account is prepared to show the division of profit and other appropriation among partners like salary, commission, interst on capital etc