Profit &Loss Appropriation A/c

The Companies Act does not prescribe any specified form for the preparathion of the Profit & Loss Account. This is due to the reason that there are many types of companies and industries, with their own peculiar characteristics, for which one set form may be suitable. However, Part II for the Schedule VI to the Companies Act has specified presentation and disclosure requirements in respect of items income & expenditure. It requires that every Profit & Loss Account of a company should be so prepared as to give a true and fair view of its operation. The Profit & Loss Account of a Company is treated as an annexure to its Balance Sheet.
In the case of companies it is necessary to split the revenue statement into three sections, viz, Trading Account, Profit and loss Account & Profit and Loss Appropriation Account. However, the splitting of the Profit and Loss Account into three sections is not forbidden by the Act. In practice the revenue statement is split into three parts; Trading Account to show gross profit or gross loss, Profit and Loss Account to show Net Profit and Profit and Loss Appropriation Account to show the profit carried to the Balance Sheet.