Distinguish between charge against profit and appropriation of profit - Accountancy - Accounting for Partnership Basic Concepts

Question

Distinguish between charge against profit and appropriation of
profit

Pushpak Popli · Accepted Answer

Solution:

Basis of Difference
Charge against/on Profits
Appropriation of Profits

Meaning
This implies the deduction of expenses from the profits in
order to compute net profit/net loss during the accounting
year
This implies the distribution of available net profits left out
after providing all expenses

Compulsion
It is a compulsory or mandatory obligation that a firm has to
bear
It is not compulsory in nature

Situation
It is provided under all circumstances- irrespective of profits
or losses
It is provided only in case a firm has profits (and not in case
of losses)

Relevant Accounts
It is recorded (debited to) the Profit and Loss Account
It is recorded (debited to) the Profit and Loss Appropriation
Account

Effect
It affects net profit
It does not net profit

Accounting Order
It is done before all appropriations of items
It is done after all charges of items

Basis of Difference	Charge against/on Profits	Appropriation of Profits
Meaning	This implies the deduction of expenses from the profits in order to compute net profit/net loss during the accounting year.	This implies the distribution of available net profits left out after providing all expenses.
Compulsion	It is a compulsory or mandatory obligation that a firm has to bear.	It is not compulsory in nature.
Situation	It is provided under all circumstances- irrespective of profits or losses.	It is provided only in case a firm has profits (and not in case of losses).
Relevant Accounts	It is recorded (debited to) the Profit and Loss Account.	It is recorded (debited to) the Profit and Loss Appropriation Account.
Effect	It affects net profit.	It does not net profit.
Accounting Order	It is done before all appropriations of items.	It is done after all charges of items.