Question : Assertion (A) : Profit and Loss Appropriation account shows the correct profit earned by the firm.
Reason (R) : The net Profit adjusted after takin into account the interest on capital, Interest on drawings, Salaries/ Commission Paid to the partner in the P/L appropriation account.
Option 1: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
Option 2: Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
Option 3: Assertion (A) is true, But Reason (R) is false
Option 4: Assertion (A) is False, But Reason (R) is True
Correct Answer: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
Solution : To demonstrate how the business appropriates or distributes the profit made throughout the year, a P&L Appropriation Account is generated. It is a development of the profit and loss account. At the conclusion of each fiscal year, it is prepared following the production of the profit and loss account and after adjusting for Interest on Capitals, Interest on Drawings, Salary/Commission to Partners, and Transfer to Reserve, the Profit and Loss Appropriation Account is prepared to distribute profits/losses among the Partners.
Hence the correct answer is option 1.
Question : Assertion (A): A partner's interest on capital is paid only from profits. Reason (R): Interest on capital is a profit appropriation that must be provided regardless of profit or loss.
Question : Assertion (A): A partner's salary is deducted from the profit and loss account.
Reason (R): A partner's salary is a appropriation of profit.
Question : Assertion (A): In order to make up for the partner's capital contribution that exceeds the profit-sharing ratio, the company pays interest on his capital.
Reason (R): Interest on capital is a charge against profit.
Question : Assertion (A): A Profit and Loss Appropriation Account is prepared to show the distribution of profits among partners as per the provision of Partnership Deed. Reason (R): Only working partner(s) can inspect the books of accounts.
Question : Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Interest Coverage Ratio expresses the relationship between profits available for payment of interest and the amount of
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