Difference between Profit and Loss Account and Profit and Loss Appropriation Account

Difference between Profit and Loss Account and Profit and Loss Appropriation Account

Profit and Loss Account

Profit and Loss Appropriation Account

1. It is prepared after Trading Account.

It is prepared after Profit and Loss Account.

2. It shows the net profit earned or net loss incurred

It shows appropriation of net profit.

3.This account has neither opening nor closing balance.

This account may have both opening and closing balances.

4. Items debited to this account are all expenses (charge against profit).

Items debited to this account are appropriations of profit.

5.The preparation of this account is not based on partnership agreement, except for interest on loan from partners

The preparation of this account is based on partnership agreement.

6. While preparing this account, matching principle (i.e., revenue is matched against expenses) is followed.

While preparing this account, matching principle is not followed.















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