Adjustments for Profit Sharing in Partnership Appropriation

Steps:

• Review the appropriation account's role: it allocates net profit to partners after specific charges and credits.
• Identify debits: interest on capital and partners' salaries reduce the profit available for sharing.
• Identify credits: interest on drawings increases the profit pool as a charge against partners' withdrawals.
• Confirm the net effect: only interest on drawings is added to the initial profit balance.

Why B is correct:

• Interest on drawings is credited to the appropriation account per partnership accounting rules, effectively adding it to the profit for equitable distribution among partners.

Why the others are wrong:

• A. Interest on capital is debited, deducting it from profit as a reward for investment.
• C. Partners' drawings are personal advances, not recorded in the appropriation account.
• D. Partners' salaries are debited, treating them as an expense deducted from profit.

Final answer: B