Share Apropriation A/C

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Why when carrying out excersises in this module, does the nett profit need carrying down to a apropration a/c, only then to charge partners interest against this amount, decreasing the nett profit. Shouldn't this be charged to the P&L in that period and carried down included in the nett profit. Their nett profit figure will move after their accounts have been published...Iam confused! :(

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Share Apropriation A/C

    Basically we are spliting the profits in to the partners current account therefore in affect what we are doing is debiting appropiation account and crediting the partners current account for partners gain.

    for partners losses we are crediting the appropiation account and debiting the current.


    Basically we are appropriating the net profit into the parnters current account according to the partners agreement which could be Interest on drawings Interest on capital partners salary.

    We appropriated after net profit because net profit shows the profit generated after all day to day operating cost and any loan interest.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Share Apropriation A/C

    Thanks. Perhaps I read the question wrong. I get the bit about sharing out the profit. I just thought we would of debited the interest a/c P&L in the period, CR partners current account b/sheet, not, dr apropriation a/c b/sheet cr partners current a/c b/sheet. I always thought interest of any kind, bank or other, was an overhead and was reported on in the accounts (P&L). If anyone asked me how much interest cost in a period I would go to a P&L, if there was interest hidden in a balance sheet account the nett profit would be overstated for the period, or year. But, hey, if it gets me a pass, I will put it wherever they want :lol:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Share Apropriation A/C

    "But, hey, if it gets me a pass, I will put it wherever they want"

    Quite funny, I remember getting that feeling alot when I started accounting.

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