Profit and Loss Vs Profit and Loss Appropriation Account

Profit and loss appropriation account is an extension of the profit and loss account itself, however, there is a fundamental difference between profit and loss & profit and loss appropriation account.

By definition, a P&L account or Income statement is one of the three financial statements of an organization which summarizes revenues and expenses to ascertain net profit or a net loss of the organization for a specific time period.

By definition, a P&L appropriation account is used to demonstrate the division or allocation of profit/losses among the owners.

Basis	Profit and Loss Account	Profit and Loss Appropriation Account
Purpose	P&L account is used to determine the Net Profit or Net Loss of an organization for a given accounting period.	P&L appropriation account is used for the 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.	The profit and loss appropriation account may have carried forward balance from the previous accounting period.
Timing	It is prepared after the trading account.	It is made after the preparation of the 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)	The preparation of P&L account is based on a partnership agreement.
Principle	The matching principle is followed i.e. expenses for an accounting period are matched against related incomes.	The matching principle is not followed while preparing a P&L appropriation account.