What is the difference?

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Anil (Querist)
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18 December 2009 Please let me know the difference between P & L adjustment account and P & L appropriation account.

Thanks.

Jag Bhushan Sharma

Jag Bhushan Sharma (Expert)
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18 December 2009 P&L Adjustment A/c is used for revaluation of assets and liabilities. P&L Appropriation A/c is used for distribution of profit and crediting reserves.

Anil

Anil (Querist)
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18 December 2009 Thank you very much for your response sir.

In case an asset is revalued upwards we debit the concerned asset and credit revaluation reserve account. When does P & L Adjustment account come into picture?

Thanks.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

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03 August 2025 Great question! Let me clarify the difference and when the **P & L Adjustment Account** is used:

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### Difference between P & L Adjustment Account and P & L Appropriation Account

| **P & L Adjustment Account** | **P & L Appropriation Account** |
| -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| Used mainly for **adjusting profit or loss** arising from **revaluation of assets and liabilities** during events like admission, retirement, or dissolution of a partner. | Used for **appropriating or distributing net profit** after it's arrived at, such as transfer to reserves, dividend declaration, partner’s salary, interest on capital, etc. |
| It **captures the difference** between the old book value and new revalued amount of assets/liabilities that impact profit or loss. | It is a **ledger account** where the **net profit after tax** is distributed or appropriated among partners or shareholders. |
| Temporary account, usually closed to Capital Accounts or Reserves after revaluation. | Final appropriation account, closed to Capital Accounts or Reserves after distribution. |

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### When does **P & L Adjustment Account** come into picture?

* Suppose a fixed asset is revalued **upwards** (say from Rs. 1,00,000 to Rs. 1,20,000).

* You **debit the asset account by Rs. 20,000** (increase in asset value).
* Instead of directly crediting a revaluation reserve, in partnership accounting, you credit the **P & L Adjustment Account** by Rs. 20,000.

* Similarly, if a liability is revalued **downwards** (say from Rs. 50,000 to Rs. 40,000), you credit the liability account by Rs. 10,000 and debit the P & L Adjustment Account by Rs. 10,000.

* After all revaluations, the **net balance** in P & L Adjustment Account (profit or loss on revaluation) is **distributed among partners’ capital accounts** in their profit-sharing ratio.

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### Summary example:

| Transaction | Debit | Credit |
| -------------------------------------------- | ----------------------------------- | --------------------------------------------------- |
| Asset revaluation ↑ by 20k | Asset Account Rs. 20,000 | P & L Adjustment Account Rs. 20,000 |
| Liability revaluation ↓ by 10k | P & L Adjustment Account Rs. 10,000 | Liability Account Rs. 10,000 |
| Net balance (profit) in P & L Adjustment A/c | - | Partners' Capital Accounts Rs. 30,000 (distributed) |

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So, **P & L Adjustment Account** acts as a temporary holding account for all revaluation profit/loss, while **P & L Appropriation Account** deals with final distribution of profits after net profit has been calculated.

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If you want, I can share a sample journal entry format for this!

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