Question

Distinguish between a charge against profit and an appropriation out of profit.

Answer 1

S. No.	Basis of Distinction	Charge Against Profit	Appropriation Out of Profit
1.	Nature	It indicates expenses to be deducted from profits while calculating net profit or loss.	It indicates distribution of net profit to various heads.
2.	Recording	It is debited to the profit and Loss Account.	It is debited to the Profit and Loss Appropriation Account.
3.	Necessary or not	It is necessary to make charges against profits even if there is a loss.	Appropriations are made only when there is profit.
4.	Example	Interest on a partner’s loan and rent paid to a partner.	Interest on capital, partner’s salary, etc.