Is it drawing made against profit entered into profit and loss application account in a partnership firm? first of all answer in yes or no.?

Question

Answer

Answer:

Yes.

Explanation:

Drawings against profit: Drawings made by partners against profits are considered as withdrawals from the business for personal use. These withdrawals are not business expenses and should not be recorded as such in the profit and loss account.

Profit and Loss Application Account: The profit and loss application account is used to distribute the profits among the partners according to their profit-sharing ratio. It is used to calculate the net profit or loss after accounting for all revenues and expenses of the partnership firm.

Treatment of drawings: Drawings made by partners are recorded as a reduction in the partner's capital account, not as an expense in the profit and loss account. This is because drawings do not affect the overall profitability of the business; they only impact the individual partner's equity in the firm.

Impact on the profit and loss account: Since drawings are not expenses of the business, they should not be entered into the profit and loss account. Including drawings in the profit and loss account would distort the true financial performance of the business and lead to incorrect profit calculations.