Glossary
Appropriation account
The section that shows how a partnership's or company's profit is divided up.
What it means
A statement following the income statement that shares the profit for the year among partners or applies a company's profit to dividends and reserves.
Example
Profit of RM60,000 is appropriated as interest on capital, salaries and the remainder in the profit-sharing ratio.
Why it matters
It makes the split of profit transparent and links the income statement to each owner's account.
In practice
The appropriation account comes straight after the income statement and starts from the net profit. It shares out profit. It does not calculate it. For a partnership, you add any interest charged on drawings to profit. Then you deduct partners' salaries and interest on capital. Finally you divide what is left in the profit-sharing ratio.
If net profit is RM60,000, interest on drawings adds RM1,000, salaries take RM10,000 and interest on capital takes RM4,000, the remaining RM47,000 is split between the partners.
Keep it separate from the income statement above it. The income statement works out how much profit was earned from trading. The appropriation account only decides who gets what. A company version does a similar job, showing transfers to reserves and dividends. Running expenses such as rent or wages never appear in it. It holds only items about how owners share the surplus.
If the order of the appropriation account is hard to remember, one of our teachers can give you a simple layout to follow and practise it with you. Book a trial class.
Related terms
Syllabus reference: Cambridge 0452 and 0985, syllabus for 2027 to 2029, sub-topic 5.2 Partnerships (page 16).
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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