What is Opening or closing balance of profit and loss appropriation account?

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Answer

Opening or Closing Balance of Profit and Loss Appropriation Account

Profit and Loss Appropriation Account is a part of the financial statement of a company that shows how the net profit or loss of the company has been appropriated or distributed among various stakeholders. The account is prepared at the end of each accounting period.

Opening Balance of Profit and Loss Appropriation Account

The opening balance of the Profit and Loss Appropriation Account is the balance brought forward from the previous accounting period. It represents the closing balance of the previous accounting period. The opening balance is shown on the credit side of the account if it represents a profit and on the debit side if it represents a loss.

Closing Balance of Profit and Loss Appropriation Account

The closing balance of the Profit and Loss Appropriation Account is the balance carried forward to the next accounting period. It represents the amount of profit or loss that has been appropriated or distributed among various stakeholders. The closing balance is shown on the debit side of the account if it represents a profit and on the credit side if it represents a loss.

Factors Affecting the Opening or Closing Balance of Profit and Loss Appropriation Account

There are several factors that can affect the opening or closing balance of the Profit and Loss Appropriation Account:

The net profit or loss of the company

The amount of dividend declared

The amount of profit or loss transferred to reserves

The amount of profit or loss carried forward to the next accounting period

It is important for a company to carefully manage its Profit and Loss Appropriation Account to ensure that the appropriate amount of profit or loss is distributed among stakeholders and that the company maintains adequate reserves for future growth and expansion.

Answer

Opening balance is BY NET PROFIT...  and closing balance is TO DIVISIBLE PROFIT...

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How do you treat the debit balance in profit and Loss appropriation account

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