Doubts

SOLUTION In case of Interest on Drawings. Application based

SOLUTION After ascertaining the Net Profit of the firm as per Profit and Loss Account, usually, the Profit and Loss Appropriation Account is prepared to show how the Net Profit…

SOLUTION No, there is no need to prepare Profit & Loss Appropriation A/c in case of sole proprietorship concerns. It is prepared in case of partnership firms.

SOLUTION Profit and Loss Account is prepared to ascertain net profit or net loss for an accounting period whereas Profit and Loss Appropriation Account is prepared to appropriate or distribute…

SOLUTION  (1.) When the partners contribute unequal amounts of capital but share profits equally. (2.) When Capital contribution is same but the share of profits are unequal. Profit and Loss…

SOLUTION In case of loss, no interest on capital will be allowed.

SOLUTION (a) When the firm has a partnership deed, interest on drawings will be charged only if it is provided in the partnership deed.(b) When the firm does not have…

SOLUTION Interest on drawings is charged to compensate the partners with less drawings because interest credited to Profit and Loss Appropriation Account will be distributed in profit sharing ratio.

SOLUTION When profit sharing ratio differs from capital ratio, the partners who contribute capital in excess of what is required as per profit sharing ratio need to be compensated. Interest…