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PARTNERSHIP ACCOUNTS PROFIT AND LOSS APPROPRIATION ACCOUNT BASICS.

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This study notes shows the basis of about the Partnership Profit and Loss Appropriation. It gives the idea of the accounts to be opened, the Proforma of Profit and Loss appropriation and its allied accounts.

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    PARTNERSHIP ACCOUNTS A. Profit and Loss Appropriation Account. A. Probable Theory Questions:- Definition type. 1. Define Profit & Loss appropriation A/c. 2. Define Partners Capital A/c. 3. Define Partners current A/c. 4. What do you mean by Partners drawings A/c. ? Distinguish type. 1. Show the difference between Profit & loss appropriation A/c & Profit and loss A/c. 2. Differentiate between Fixed Capital and Fluctuating capital. 3. Distinguish between Charged against profit and Appropriation of profit. Essay type. 1. What are the objectives of preparing Profit and Loss appropriation A/c.? 2. How to adjust the capitals of partners when the share of profit of a partner is guaranteed by i) The Firm ii) Another partner? 3. Why the current accounts of the partners are opened? 4. When there are partners capital accounts? B. Basic formats of the required accounts. 1. Profit and Loss Appropriation Account (P&L App. A/c.) Dr. Particulars. To Salaries to Partners. To Commission to Partners. To Interest on Partners' Capitals To Reserve A/c. To Interest on Partners' Loan. To Profit transferred to Partners" Capital or Current A/c. ( Balancing Figure) Amt. Particulars. By Profit & Loss A/c ( Profit transferred from P & L A/c before charging Salary & interest). By Interest on Drawings of Partners. By Interest on Current A/c. Cr. Amt.
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    2. Partners' Capital Account (When the capitals are fixed) Dr. Particulars. To Cash or Bank A/c (Permanent withdrawal of Capital) To Balance c/d. (Closing Balance) B c Particulars. By Balance b/d. (Opening Balance) By Cash or Bank A/c. (Additional Capital brought in) 3. Partners' Capital Account (When the capitals are fluctuating) B B Cr. c Cr. c Dr. Particulars. To Drawings To Interest on Drawings To App. A/c. (Share of loss in case of Loss) To Balance c/d (Closing Bal.) (Balancing Fig.) B c Particulars. By Balance b/d. (Opening Balance) By Interest on Capital By Cash or Bank A/c. (Additional Capital brought in by partners By Salary to Partner By Commission to partner By P&L App. A/c (Share of profit in case of Profit)
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    4. Partners' Current Account (When the capitals are fixed) to be applied with no. 2 A/c Format only. Dr. Particulars. To Balance b/d (If there is op.debit bal.) To Drawings To App. A/c. (Share of loss in case of Loss) To Interest on Drawings To Balance c/d (Closing Bal.) (Balancing Fig.) B c Particulars. By Balance b/d. (Opening Cr. Balance) By Interest on Capital **** By Salary to Partner By Commission to partner By P&L App. A/c (Share of profit in profit) B Cr. c C. Requirement of Drawing the Accounts. i) For Partnership with Partners Fixed capitals. 1. Profit and loss Appropriation A/c. 2. Partners capital A/c. ( Only the Treatments of Opening balance, Closing Balance and further Capital brought in or withdrawn will be shown). 3. Partners Current A/c ( All the adjustments will be shown in this A/c.). For Partnership with Partners Fluctuating Capitals. 1. Profit and loss Appropriation A/c. 2. Partners capital A/c ( All the adjustments will be shown in this A/c.).

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