profit and loss appropriation account

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A statement showing how the net profits or losses have been dealt with. In a company, the retained earnings brought forward is added to the net profit for the year; from this total taxation and dividends paid and proposed are deducted; other transfers to and from reserves are deducted or added as appropriate. In partnership accounts, the profit or loss available for appropriation is given at the beginning of the statement. Each partner’s contribution of interest on drawings and entitlement to salary and interest on capital, as appropriate, are deducted, leaving a balance to be shared between the partners in the profit-sharing ratio.

Subjects: Accounting.

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