Can someone show profit and loss appropriation account example?

The profit and loss appropriation account is an account created in addition to the Trading & Profit and loss account in the case of partnership firms. It is a nominal account.

The net profit or loss from the Profit and loss account is transferred to the Capital A/c when we do the accounting of sole proprietors.

But, while doing the accounting of partnership, there is a need to appropriate this profit or loss as there are two or more partners’ capital accounts. So, for this purpose, the Profit and loss appropriation account is created.

The net profit or loss is appropriated among the partner’s capital after adjustment the items like partner’s salary, commission, interest on capital, interest on drawing etc. It consists of items related to the partner’s claim.

The format of the profit and loss appropriation account is as below:

Let solve a problem to sharpen our concept:

A and B are partners in firm sharing profits and losses in the ratio of 4:1. On 1st January 2019, their capitals were ₹ 20,000 and ₹ 10,000 respectively. The partnership deed specifies the following:

1. Interest on capital is to be allowed at 5% per annum.
2. Interest on drawings charged to A and B are ₹ 200 and ₹ 300 respectively.
3. The net profit of the firm before considering interest on capital and interest on drawings amounted to ₹ 18,000.
4. A is to be paid an annual salary of ₹2000

Prepare Profit and loss appropriation account for the year ending 31st December 2019.

Solution: