It is similar to retained earning account.
Profit and loss appropriation is prepared after preparation of profit and loss account.
It is prepared for distribution of net profit amount into different purposes.
This statement is prepared to show the decision made by the board of directors regarding distribution of dividend to shareholders, bonus shares issued to shareholders.
Board of directors keep certain part of net profit amount to different reserve funds.
This statement is also prepared to adjust provisions and expenses of previous accounting year.
These expenses are readjustment of reserve fund amount, provision for tax etc.
Nepal Company Act 2063 BS, does not specify for the preparation of profit and loss account.
The main features of profit and loss appropriation account are given below:
· It shows the undistributed net profit of the previous and current year.
· It facilitates to adjust previous year’s provisions and actual expenses.
· It shows the amount of new reserve and other various types of funds.
· It shows the interim dividend paid, proposed dividend and bonus shares issued to shareholders.
ABC Company Ltd
Profit and Loss Appropriation Account
For the year ended 31st March 20X1
Particulars |
Amount |
Particulars |
Amount |
To General reserve or fund |
xxxx |
By Balance b/d (net profit last year) |
xxxx |
To Dividend equalization fund |
xxxx |
By Net profit b/d (net profit current year ) |
xxxx |
To Sinking fund |
xxxx |
By Provision for taxation of last year |
xxxx |
To Assets replacement fund |
xxxx |
By Deficit or balance c/d |
xxxx |
To Bonus shares |
xxxx |
|
|
To Interim dividend |
xxxx |
|
|
To Proposed dividend on equity shares |
xxxx |
|
|
To Proposed dividend on pref. shares |
xxxx |
|
|
To Tax paid for last year |
xxxx |
|
|
To Surplus or balance c/d |
xxxx |
|
|
|
xxxxx |
|
xxxxx |
#####
Click on link for YouTube videos |
|
Share (Accounting for Share) |
|
Share in Nepali |
|
Debentures |
|
Final Account: Class 12 |
|
Final Account in Nepali |
|
Work Sheet |
|
Ratio Analysis (Accounting Ratio) |
|
Fund Flow Statement |
|
Cash Flow Statement |
|
Theory Accounting Xii |
|
Theory: Cost Accounting |
|
Cost Accounting |
|
LIFO−FIFO |
|
Cost Sheet, Unit Costing |
|
Cost Reconciliation Statement |
#####
PROBLEM: 4
ABC Company Ltd provides the following extracted information on 31st March 2020:
Profit and loss appropriation account |
22,000 |
|
Interim dividend |
10,000 |
Net profit last year |
65,000 |
|
Tax paid of last year |
12,000 |
General reserve |
30,000 |
|
Provision for taxation of last year |
16,000 |
Share capital |
200,000 |
|
|
|
Addition information
· New general reserve created for the year Rs 15,000
· Proposed dividend is declared 5% of paid up value of share capital
· Bonus share declared to shareholders 10% of paid up value of share capital
Required: Profit and loss appropriation account
[Answer: Surplus = Rs 36,000]
SOLUTION:
ABC Company Ltd
Profit and Loss Appropriation Account
For the year ended 31st March 2020
Particulars |
Amount |
Particulars |
Amount |
To General reserve |
15,000 |
By Balance b/d |
22,000 |
To Bonus shares |
20,000 |
By Net profit last year |
65,000 |
To Proposed dividend |
10,000 |
By Provision for taxation of last year |
16,000 |
To Tax paid for last fiscal year |
12,000 |
|
|
To Interim dividend |
10,000 |
|
|
To Surplus (b/f) |
36,000 |
|
|
|
103,000 |
|
103,000 |
********
PROBLEMS AND ANSWERS |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
Problem: 4A
Extracted information is given by FD Company Ltd on 31st March 2020:
Debit balance |
Amount |
Credit balance |
Amount |
Tax paid of last year |
15,000 |
P&L appropriation account |
65,000 |
Interim dividend |
11,000 |
Net profit current year |
125,000 |
|
|
Equity shares capital @ Rs 100 |
400,000 |
|
|
8% Preference shares @ Rs 100 |
200,000 |
|
|
Provision for taxation of last year |
16,000 |
Addition information:
· Transfer to sinking fund Rs 25,000.
· New general reserve created for the year Rs 15,000.
· Proposed dividend is declared Rs 15 per share for equity shares capital.
Required: Profit and loss appropriation account
[Answer: Surplus = Rs 64,000]
* Dividend on preference shares = Rs 16,000
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
Problem: 4B
Extracted information is given by NM Company Ltd on 31st March 2020:
Debit balance |
Amount |
Credit balance |
Amount |
Tax paid of last year |
12,000 |
Net profit (last year) |
42,000 |
Interim dividend |
10,000 |
Net profit (current year) |
98,000 |
|
|
Equity shares capital @ Rs 100 |
200,000 |
|
|
Provision for taxation of last year |
16,000 |
Addition information:
· Transfer to dividend equalization fund Rs 15,000 and assets replacement fund Rs 40,000.
· New general reserve created for the year Rs 13,000.
· Proposed dividend is declared 15% for equity shares capital.
· Bonus share declared to shareholders 10% on share capital.
Required: Profit and loss appropriation account only
[Answer: Surplus = Rs 16,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
Problem: 4C
SKN Company Limited has following extracted data on 31st December 2019:
Debit balance |
Amount |
Credit balance |
Amount |
Salary |
70,000 |
Gross profit |
325,000 |
Export duty |
35,000 |
Dividend received |
3,500 |
Phone and internet |
10,000 |
Provision for bad debts |
2,000 |
Sales commission |
25,000 |
Sublet rent received |
8,000 |
Interest on loan |
10,000 |
Interest on investment |
7,500 |
Advertisement |
12,000 |
Commission received |
4,000 |
Audit fees |
8,000 |
Provision for tax (last year) |
13,000 |
Office rent |
7,000 |
Net profit last year |
85,000 |
Depreciation on equipment |
6,000 |
|
|
Director’s fee |
14,000 |
|
|
Carriage outward |
60,000 |
|
|
Selling and distribution |
18,000 |
|
|
Bad debts |
17,000 |
|
|
Insurance paid |
8,000 |
|
|
Tax paid last year |
11,000 |
|
|
Tax paid current year |
23,000 |
|
|
Proposed dividend |
20,000 |
|
|
Transfer to general reserve |
65,000 |
|
|
Transfer to sinking fund |
7,000 |
|
|
Required: Profit and loss account and profit and loss appropriation account
[Answer: Net profit = Rs 27,000; Surplus = Rs 22,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
Problem: 4D
EP Company Limited has following extracted data on 31st December 2019:
Debit balance |
Amount |
Credit balance |
Amount |
Salary |
90,000 |
Gross profit |
445,000 |
Phone and internet |
12,000 |
Dividend received |
8,000 |
Commission |
10,000 |
Provision for bad debts |
7,500 |
Interest on loan |
12,000 |
Sublet rent received |
4,000 |
Advertisement |
8,000 |
Interest on investment |
13,000 |
Audit fees |
7,000 |
Commission received |
8,000 |
Office rent |
66,000 |
P&L appropriation |
25,000 |
Depreciation on furniture |
14,000 |
|
|
Director’s fee |
60,000 |
|
|
Carriage outward |
18,000 |
|
|
Selling and distribution |
17,000 |
|
|
Bad debts |
8,000 |
|
|
Insurance paid |
11,000 |
|
|
Tax paid last year |
23,000 |
|
|
Tax paid current year |
20,000 |
|
|
Proposed dividend |
65,000 |
|
|
Transfer to dividend redemption fund |
16,000 |
|
|
Transfer to assets replacement fund |
19,000 |
|
|
Required: Profit and loss account and profit and loss appropriation account
[Answer: Net profit = Rs 132,500; Surplus = Rs 34,500]
***** #EPOnlineStudy *****
Thank you for investing your time.
Please comment on article.
You can help me by sharing this article at your social media platform.
Jay Google, Jay YouTube, Jay Social Media
जय गूगल, जय युट्युब, जय सोशल मिडिया