The appropriation account

Some types of businesses also show an appropriation account, which follows on immediately after the net profit or loss shown on the last line of the income statement. Whilst it is not relevant where the business has a sole owner, for a partnership its function is to reflect the financial implications of the partnership agreement by allocating profits or losses between partners. For a limited company it shows deductions for taxation liabilities, dividends and transfers to reserves.

The balance sheet

This is the summary of a business's assets, liabilities and capital, reflecting the accounting equation Assets - Liabilities = Capital (A - L = C). It shows all the balances carried down within ledger accounts at the end of the financial period, though 'interim' balance sheets could be produced at any time. The basic contents of the balance sheet are similar, whether the business is in the manufacturing, trading or service sectors. However, if the business is structured as either a. partnership or a limited company


Alternative formats: 'horizontal' layout
The financia.l statements presented within this chapter have all been produced. following the vertical or columnar layout, which is followed by vast majority of UK business. Remember that the income statement (though not the balance sheet) IS part of the double-entry bookkeeping system so even tho~gh. that account might not be shown as being split between debit and credits sides, each entry within it will have been transferred from the debit or credit SIde of a general ledger account.