Distinguish between profit and loss account and profit and loss appropriation account
Solution:
Difference between Profit and Loss A/c and Profit and Loss Appropriation A/c:
Difference between Profit and Loss A/c and Profit and Loss Appropriation A/c:
Basis | Profit and Loss Account | Profit and Loss Appropriation Account |
Preparation | It is prepared after Trading A/c. | It is prepared after Profit and Loss A/c. |
Net Profit | It shows the Net Profit of the year. | It shows how Net Profit is appropriated (distributed). |
Balances | This account does not have opening and closing balances. | This account may have both opening and closing balances. |
Items Debited | Items debited to this account are all expenses (charge against profit). | Items debited to this account are appropriations. |