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Difference Between Appropriation of Profit and Charge Against Profit

Appropriation of profit

Charge against profit

It is the distribution of net profit to various heads

It is the deduction from revenue to ascertain net profit or net loss

It is made only if there is a profit

It is made even if there is a loss

It is done after the creation of all the charges

It is done before the appropriation of profit

This will be debited to P/L Appropriation A/c

It will be debited to P/L A/c or debited to the respective provision A/c

Examples: transfer to general reserve, transfer to contingency reserve

Examples: Provision for doubtful debts, Provision for depreciation, provision for discount on debtors etc.

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