Difference Between Profit and Loss & Profit and Loss Appropriation Account

 

Basis	Profit and Loss Account	Profit and Loss Appropriation Account
Purpose	P&L account is used to determine Net Profit or Net Loss of an organization for a given accounting period.	P&L appropriation account is used for allocation and distribution of Net Profit among partners, reserves and dividends.
Made by	P&L account is prepared by all types of businesses.	P&L appropriation account is prepared mainly by partnership firms.
Balances	Profit and loss account don’t have any opening or closing balance as it is prepared for a specific accounting period.	Profit and loss appropriation account may have carry forward balance from the previous accounting period.
Timing	It is prepared after the trading account.	It is made after preparation of profit and loss account.
Nature	Items debited are all expenses (charged against profit)	Items debited are all appropriations of profit. (how profit is divided)
Partnership	Preparation of P&L account is not based on a partnership agreement (exception – interest on a loan from partners)	Preparation of P&L account is based on a partnership agreement.