Appropriation account is created so that the partners can see how the business's earnings are

A profit and loss appropriation account is created so that the partners can see how the business's earnings are being split up. Net profits per day from the P&L account and interest on drawings are credited to this account, while interest on capital and partner compensation are debited.

Now, while doing the math, it's a good idea to set up the Partner's Capital Account and the Profit and Loss Appropriation Account.

BUT

Truth be told.

The Allocation of Profits and Losses, No new accounts will be made. True, no such account has been prepared. Accountancy procedures have shifted as a result of technological advancements.

It should be made abundantly clear that each Post in a ledger has the same impact on all ledgers. Because of this, it is not necessary to make an opening or closing balance sheet.

The affected journals will be used to generate the P&L appropriation account and the Partner's Capital Account, respectively.

If you want to make sure you don't forget any adjustments, my recommendation is to prepare all of the accounts at the same time. In addition, you can finish the calculation by the time you've read all the adjustments.

now Now, Regarding Your Obtained Reason for Asking

In other words, why do we need a profit-and-loss approval account in the first place?
Notwithstanding the following, the answer is the following: (i)interest on Capital; (ii)interest on Drawings; (iii)partner's remuneration regardless of profit or loss; (iv)partners' commission; (v)any loss or profit taken by the partner/partners exclusively;

The P&L Appropriation Account is set up before the Partners' Capital Account so that the Appropriated Profit can be allocated according to the profit sharing ratio.

For This Reason -

A. Partner's Capital Account is simplified, as the bulk of the calculation has already been done; all that remains to be done is posting.

The Partner's Capital Account Can Be Very Untidy Because: B. There Are Two Or More Partners, And In The Event Of Admission, Retirement, Or Death, There Are At Least Three

Hey Siar, you’ve laid out some really good points about the Profit & Loss Appropriation Account and Partners’ Capital Account!

Here’s a simplified breakdown to why the Profit & Loss Appropriation Account (P&L Appropriation Account) is still relevant and important, even with modern accounting software and automation:

Why create a Profit & Loss Appropriation Account?

Clear allocation of earnings/losses:
The P&L Appropriation Account clearly shows how the net profit from the business is split among partners after considering:
- Interest on capital (debited)
- Interest on drawings (credited)
- Partner’s salary or commission (debited)
- Any other appropriations (bonus, reserves, etc.)
Helps in maintaining clarity before updating capital accounts:
Since the capital accounts are affected by multiple adjustments (profit share, interest, drawings, remuneration), the P&L Appropriation Account acts as a summary account where all such adjustments are posted first.
This helps keep partner capital accounts cleaner and simpler because you post just the final profit/loss share from the P&L Appropriation Account to each partner’s capital account.
Legal and reporting clarity:
It’s often a requirement for partnerships (especially in audited financials) to clearly show appropriation of profits separately from operational profit & loss. It brings transparency and ease during audits and tax assessments.

What about no new accounts or automation?

Yes, with accounting software, you may not need to manually prepare these accounts separately because the system records all journal entries behind the scenes.
But conceptually and practically, the P&L Appropriation Account is still there as it tracks the appropriations of profits, and partners and auditors benefit from this clear segregation.

To summarize:

P&L Appropriation Account shows the breakup of profits before they hit partner capital accounts.
It handles all the “adjustments” like interest on capital/drawings, salary, commission, etc.
Posting the final adjusted profit or loss to the partners’ capital accounts simplifies the capital account tracking.
Even if your software hides it from you, this is the underlying accounting logic and good practice.