Arrange the steps for preparing a Profit and Loss Appropriation Account in the correct sequential order:(A) Transfer the net profit to the credit side of the P&L Appropriation A/c.(B) Divide the remaining divisible profit among partners in their Profit Sharing Ratio.(C) Ascertain the net profit after providing for all charges against profit.(D) Debit the P&L Appropriation A/c with all appropriations (e.g., partner's salary, interest on capital).(E) Credit the P&L Appropriation A/c with interest on drawings and any deficiency on account of a partner's guarantee of earnings to the firm.Choose the correct answer from the options given below:
- A(A), (B), (C), (D), (E)
- B(C), (A), (D), (E), (B)
- C(B), (C), (E), (A), (D)
- D(B), (C), (D), (A), (E)
Solution & Step-by-step Explanation
The chronological steps to prepare a Profit and Loss Appropriation Account are:Step 1 (C): Ascertain the net profit from the general P&L Account after meeting all external charges.Step 2 (A): Transfer this net profit to the credit side of the P&L Appropriation Account.Step 3 (D): Debit corporate appropriations like interest on capital, partner salaries, and commissions.Step 4 (E): Credit any internal income additions like interest on drawings.Step 5 (B): Distribute the final residual net divisible profit balance among partners according to their agreed profit-sharing ratio.Thus, the correct sequence is (C), (A), (D), (E), (B).