Question

Distinguish between a Profit and Loss Account and a Profit and Loss Appropriation Account.

Answer 1

S. No.	Basis of Distinction	Profit and Loss Account	Profit and Loss Appropriation Account
1.	Stage of Preparation	It is prepared after the trading account and hence starts with the gross profit disclosed by the trading account.	It is prepared after the Profit and Loss Account and hence starts with the net profit disclosed by the Profit and Loss Account.
2.	Objective	It is prepared to ascertain net profit or net loss.	It is prepared to show appropriation, i.e., distribution of net profit of the year among the partners.
3.	Opening/Closing Balance	This account has neither an opening balance nor a closing balance.	This account may have opening as well as closing balances.
4.	Charge or Appropriation	Expenses debited to this account are charged against profits.	Expenses debited to this account are an appropriation of profits.
5.	Partnership Agreement	This account is not prepared on the basis of a partnership agreement, except for interest on loans from partners.	This account is prepared on the basis of the partnership agreement.
6.	Matching Principle	The matching principle (i.e., matching of revenue against expenses) is followed while preparing this account.	The matching principle is not followed while preparing this account.