The Profit and Loss Appropriation Account is merely an extension of the Profit and Loss Account of the firm,

Which, among the following, is not shown in the Profit and Loss Appropriation Account?

The Profit and Loss Appropriation Account deals with the distribution of net profit among partners after it has been calculated in the Profit and Loss Account.

Let's examine each option:

Option 1: Partner's Salary - This is shown in the P&L Appropriation Account as it represents appropriation (distribution) of profit to partners for their services.

Option 2: Payment to Vendor - This is a normal business expense related to purchases or services obtained for the business. It is recorded in the Trading Account or Profit and Loss Account to calculate the net profit, not in the appropriation account.

Option 3: Interest on Capital - This is shown in the P&L Appropriation Account as it represents the return given to partners on their capital invested in the firm.

Option 4: Interest on Drawings - This is shown in the P&L Appropriation Account as it represents an addition to profits (recovered from partners who withdrew money during the year).

The key distinction is: Items that help calculate net profit go in the Profit and Loss Account, while items that show how to distribute the already calculated net profit among partners go in the Profit and Loss Appropriation Account.

Payment to vendors is a business expense that reduces the gross profit to arrive at net profit. Once net profit is determined, only then does the appropriation process begin. Therefore, payment to vendors has no place in the P&L Appropriation Account.

Correct Answer: Option 2