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O Level Accounting (7707)•7707/11/M/J/22
Question 23 from 7707/11/M/J/22

Explanation

Partnership Appropriation Account Divides Profits

Steps:

  • Identify the appropriation account as a section in the partnership profit and loss account.
  • Note it allocates net profit after expenses to partners per agreement terms.
  • Recognize it handles items like interest on capital, salaries, and profit-sharing ratios.
  • Conclude its main role is showing final profit or loss division among partners.

Why D is correct:

  • The appropriation account systematically divides the year's profit or loss between partners based on their agreement, ensuring equitable distribution as per partnership law.

Why the others are wrong:

  • A: Interest on drawings is calculated separately in the current account, not the appropriation account.
  • B: Interest on capital is an appropriation of profit, but the account's purpose is broader profit division.
  • C: Partner salaries are allocated within the account, but it primarily shows overall profit sharing, not just salaries.

Final answer: D

Topic: Partnerships

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