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AA-19-Profit Distribution

My Videos (Accounts Officer ) (717 Points)

10 June 2023

All Respected members,

Please educate me what would be a profit distribution journal entry when a firm has a 2 partners of firm.

Further, where this distribution will exist; Income statement or Balance sheet ?

Thanks in advance for your precious time and efforts to reply this query.

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13 Replies

RAJA P M ("Do the Right Thing...!!!") (128091 Points)
Replied 11 June 2023

Profit share will be shown in BALANCE SHEET (Partners Capital (current account).

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prasad Nilugal ( GST Practitioner & Accounts ) (14807 Points)
Replied 11 June 2023

1) fluctuating Capital method entry will be

Net profit of X A/c Dr
To X Capital A/c Cr
( net profit transfer to Capital account)

Net profit of Y A/c Dr
To Y Capital. A/c Cr
( net profit transfer to Capital account)

------------------------

2 ) Fixed Capital method entry will be

Net profit of X A/c Dr
To X current A/c Cr
( net profit transfer)

Net profit. Y A/c Dr
To Y current A/c Cr
( net profit transfer )

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RAJA P M ("Do the Right Thing...!!!") (128091 Points)
Replied 11 June 2023

Good one Mr Prasad Nilugal...

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prasad Nilugal ( GST Practitioner & Accounts ) (14807 Points)
Replied 11 June 2023

How are you Raja P M sir ?. After long time.

RAJA P M ("Do the Right Thing...!!!") (128091 Points)
Replied 11 June 2023

Yes sir, long time...

How are You...???

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prasad Nilugal ( GST Practitioner & Accounts ) (14807 Points)
Replied 11 June 2023

Fine .......................

My Videos (Accounts Officer ) (717 Points)
Replied 12 June 2023

Dear Raja PM,

Thanks for your reply.

My Videos (Accounts Officer ) (717 Points)
Replied 12 June 2023

Dear Mr. Parsad Nilugal,

Thanks a lot to give detailed reply.

Please let me know that net profit from p&l can directly transfer to partners account by journal entry or we have to prepare 1st profit appropriation account and then transfer profit from that account?

Further, if we prepare profit appropriation account what would be journal entry of it ?

prasad Nilugal ( GST Practitioner & Accounts ) (14807 Points)
Replied 12 June 2023

We have prepare profit & Loss Appropriation and profit distribution . as follows .

Profit and Loss Appropriation A/c Dr

To Net profit of X A/c Cr

To Net profit of Y A/c Cr

( profit distributed among the partners )

In first reply - Net profit transfer entry .

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Yasaswi Gomes new (Finance ) (4520 Points)
Replied 12 June 2023

Profits for shareholders and owner

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My Videos (Accounts Officer ) (717 Points)
Replied 12 June 2023

Dear Mr. Parsad Nilugal,

Thanks a lot again to give detailed reply.

please let me know if we do not pay any other remuneration like salaries, commission etc., do we have to transfer same balance to partners current account ?

Further, please let me know what is the nature of P&L appropriation account and where will it go in balance sheet?

Yasaswi Gomes new (Finance ) (4520 Points)
Replied 13 June 2023

Appropriation doesnt distribute profits but normal profit and loss does. I have attached acca global for your convenience. You can follow this format and use AS standards for everything. Use company acts ratios if you suspect that your ratios will be hindered. I still think ratios can be impacted so contact someone to find out the truth

Attached File : 3176554 20230613071232 sa aug11 partnershipsfa2 1 .pdf downloaded: 107 times

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