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    Question

    Which one of the following item cannot be recorded in

    Profit and Loss Appropriation Account? 
    A Interest on Capital Correct Answer Incorrect Answer
    B Manager’s Commission Correct Answer Incorrect Answer
    C Interest on Drawings Correct Answer Incorrect Answer
    D Partner’s Salary Correct Answer Incorrect Answer

    Solution

    The Profit and Loss Appropriation Account is used only in partnership firms to distribute profits among partners. Items recorded here include: • Interest on Capital (appropriation item) • Interest on Drawings (appropriation item) • Partner’s Salary (appropriation item) However: Manager’s Commission This is a business expense, not an appropriation of profit. Therefore, it is recorded in the Profit & Loss Account, not in the Profit & Loss Appropriation Account.

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