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In a partnership, what is the purpose of the Profit and Loss Appropriation Accou
In a partnership, what is the purpose of the Profit and Loss Appropriation Account?
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Practice Questions
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Q1
In a partnership, what is the purpose of the Profit and Loss Appropriation Account?
To record all income and expenses
To allocate profits among partners
To determine the net profit
To record capital contributions
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The Profit and Loss Appropriation Account is used to allocate the net profit among the partners as per the partnership agreement.
Questions & Step-by-step Solutions
1 item
Q
Q: In a partnership, what is the purpose of the Profit and Loss Appropriation Account?
Solution:
The Profit and Loss Appropriation Account is used to allocate the net profit among the partners as per the partnership agreement.
Steps: 5
Show Steps
Step 1: Understand that a partnership is a business owned by two or more people.
Step 2: Know that when the partnership makes money, it has a net profit.
Step 3: The Profit and Loss Appropriation Account is a special account used to decide how to share that net profit among the partners.
Step 4: The sharing of profit is done according to the rules set in the partnership agreement.
Step 5: This account helps keep track of how much each partner gets from the profits.
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