THE ACCOUNT WHERE THE PROFIT ARE DISTRIBUTED TO THE PARTNER IN THEIR PROFIT SHARING RATIO IN PARTNERSHIP IS
- A. appropriation account ✓
- B. profit and loss account
- C. balance sheet
- D. trading account
The answer to the question is: A. appropriation account
In a partnership, the account where the profits are distributed to the partners in their profit-sharing ratio is known as the appropriation account. The appropriation account is used to record the allocation of profits among the partners according to the terms of the partnership agreement. It is a temporary account that is closed at the end of the accounting period and its balance is transferred to the individual capital accounts of the partners.
The appropriation account typically includes items such as interest on capital, salary or commission to partners, and any other specific allocations of profits as agreed upon by the partners. These allocations are made before the determination of the net profit for distribution among the partners. The purpose of maintaining an appropriation account is to ensure that the profits are distributed in accordance with the partnership agreement and that each partner receives their rightful share based on their profit-sharing ratio.
In summary, in a partnership, the appropriation account serves as the mechanism for distributing profits among partners based on their profit-sharing ratio as per the partnership agreement.