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CBSECommerce (English Medium) Class 12
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Syllabus

Distribution of Profit Among Partners - Profit and Loss Appropriation Account

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Topics

  • Introduction
  • Features
  • Specimen
  • Journal Entries
  • Example
CBSE: Class 12
CISCE: Class 12

Format: Profit & Loss Appropriation Account

                                             Profit & Loss Appropriation Account

                                                         For the year ended.....

Dr.                                                                                                                                     Cr.

Particulars (₹) Particulars (₹)
To Interest on Capital A/cs:   By Profit & Loss A/c  
A ..... (Net Profit transferred from Profit & Loss A/c) .....
B .....    
    By Interest on Drawings A/cs:
A
B		 .....
.....
To Partners’ Salaries .....
To Partners’ Commissions .....
To Reserve A/c .....    
To A's Capital A/c (Profit) .....  
To B's Capital A/c (Profit) .....  
  .....   .....
CBSE: Class 12
CISCE: Class 12

Journal Entries: Profit & Loss Appropriation A/c

A. Transfer of Net Profit/Net Loss:

1. If Net Profit:

Profit & Loss A/c     ...Dr.

     To Profit & Loss Appropriation A/c

(Being the net profit transferred)

2. If Net Loss:

Profit & Loss Appropriation A/c     ...Dr.

          To Profit & Loss A/c

(Being net loss transferred)

B. Interest on Drawings:

1. For Charging Interest on Drawings:

Partners' Capital/Current A/cs (Individually)     ...Dr.

       To Interest on Drawings A/c

(Being the interest charged on drawings)

2. For Transfer to P&L Appropriation A/c:

Interest on Drawings A/c     ...Dr.

        To Profit & Loss Appropriation A/c

(Being the interest on drawings transferred)

C. Interest on Capital

1. For Allowing Interest on Capital

Interest on Capital A/c     ...Dr.

        To Partners' Capital/Current A/cs (Individually)

(Being the interest allowed on partners' capital)

2. For Transfer to P&L Appropriation A/c

Profit & Loss Appropriation A/c     ...Dr.

        To Interest on Capital A/c

(Being the interest on capital transferred)

D. Partners' Salaries/Commissions 

1. For Allowing Partner’s Salary/Commission:

Partners' Salary/Commission A/cs     ...Dr.

        To Concerned Partners' Capital/Current A/cs

(Being the salary/commission allowed to partners)

2. For Transfer to P&L Appropriation A/c:

(ii) Profit & Loss Appropriation A/c     ...Dr.

        To Partners' Salary/Commission A/cs

(Being the salary/commission to partners transferred)

E. Transfer to General Reserve

Profit & Loss Appropriation A/c     ...Dr.

        To General Reserve A/c

(Being the amount transferred to Reserve)

F. Distribution of Profit / Loss among Partners:

1. If Profit:

Profit & Loss Appropriation A/c     ...Dr.

       To Partners' Capital/Current A/cs (Individually)

(Being profit distributed in a profit‑sharing ratio)

2. If Loss:

Partners’ Capital/Current A/cs      ...Dr.

        To Profit & Loss Appropriation A/c

(Being loss distributed in the profit‑sharing ratio)

Note: If the firm incurs a loss, no interest on capital, salary, or commission is allowed unless specifically stated in the question.

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Related QuestionsVIEW ALL [7]

Dinesh and Sugumar entered into a partnership agreement on 1st January 2018, Dinesh contributing ₹ 1,50,000 and Sugumar ₹ 1,20,000 as capital. The agreement provided that:

  1. Profits and losses to be shared in the ratio 2 : 1 as between Dinesh and Sugumar.
  2. Partners to be entitled to interest on capital @ 4% p.a.
  3. Interest on drawings to be charged Dinesh: ₹ 3,600 and Sugumar: ₹ 2,200
  4. Dinesh to receive a salary of ₹ 60,000 for the year, and
  5. Sugumar to receive a commission of ₹ 80,000

During the year ended on 31st December 2018, the firm made a profit of ₹ 2,20,000 before adjustment of interest, salary and commission. Prepare the Profit and loss appropriation account.

Anand and Narayanan are partners in a firm sharing profits and losses in the ratio of 5:3. On 1st January 2018, their capital was ₹ 50,000 and ₹ 30,000 respectively. The partnership deed specifies the following:

  1. Interest on capital is to be allowed at 6% per annum.
  2. Interest on drawings charged to Anand and Narayanan are ₹ 1,000 and ₹ 800 respectively.
  3. The net profit of the firm before considering interest on capital and interest on drawings amounted to ₹ 35,000.

Give necessary journal entries and prepare profit and loss appropriation accounts as on 31st December 2018. Assume that the capitals are fluctuating.

Sibi and Manoj are partners in a firm. Sibi is to get a commission of 20% of net profit before charging any commission. Manoj is to get a commission of 20% on net profit after charging all commission. Net profit for the year ended 31st December 2018 before charging any commission was ₹ 60,000. Find the commission of Sibi and Manoj. Also, show the distribution of profit.

Antony and Ranjith started a business on 1st April 2018 with capitals of ₹ 4,00,000 and ₹ 3,00,000 respectively. According to the Partnership Deed, Antony is to get the salary of ₹ 90,000 per annum, Ranjith is to get 25% commission on profit after allowing salary to Antony and interest on capital @ 5% p.a. but after charging such commission. The profit-sharing ratio between the two partners is 1 : 1. During the year, the firm earned a profit of ₹ 3,65,000.
Prepare profit and loss appropriation account. The firm closes its accounts on 31st March every year.

Why is the profit and loss appropriation account prepared?

Anand and Narayanan are partners in a firm sharing profits and losses in the ratio of 5 : 3. On 1st January 2018, their capitals were ₹ 50,000 and ₹ 30,000 respectively. The partnership deed specifies the following:

  1. Interest on capital is to be allowed at 6% per annum.
  2. Interest on drawings charged to Anand and Narayanan are ₹ 1,000 and ₹ 800 respectively.
  3. Interest on drawings charged to Anand and Narayanan are ₹ 1,000 and ₹ 800 respectively.

Give necessary journal entries and prepare profit and loss appropriation account as on 31st December 2018. Assume that the capitals are fluctuating.

Which of the following is shown in the Profit and loss appropriation account?

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