Question

Distinguish between P & L Account and P & L Appropriation Account.

Hint:

While the P & L Account helps in measuring the financial performance, the P & L Appropriation Account helps in managing profit distribution.

Answer 1

The Profit and Loss (P & L) Account and the P & L Appropriation Account are two important financial statements, but they serve different purposes. Here is the distinction between the two:

P & L Account: The Profit and Loss Account is a financial statement that shows the company's revenues, expenses, and profits or losses for a particular period. It is used to determine the net profit or net loss of the company. The P & L Account covers the entire operational period and includes both operating and non-operating incomes and expenses.
P & L Appropriation Account: The Profit and Loss Appropriation Account is a part of the final accounts of a company. It is used to show how the net profit or loss, calculated from the P & L Account, is distributed among the partners or shareholders. It is used to allocate profits for dividend distribution, reserves, or retained earnings.
Key Differences:

The P & L Account deals with the revenue and expenses for the period, whereas the P & L Appropriation Account deals with the distribution of the profit.
The P & L Account is prepared to determine the overall profit or loss, while the P & L Appropriation Account allocates the profit or loss among stakeholders.
The P & L Appropriation Account includes items like dividends, reserves, and profit-sharing, which are not included in the P & L Account.

In conclusion, the P & L Account shows the overall profit or loss of the company, while the P & L Appropriation Account shows how that profit or loss is divided.