What is Profit Available for Appropriation || Explained in detail

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It’s the profit left in a company after paying taxes, following accounting rules, and adjusting for past losses or profits. This is the amount the company can “distribute” (use) for things like:

  • Dividends to shareholders

  • Reserves (saving for future needs)

  • Bonus to employees

How is it calculated?

  1. Start with Net Profit (after tax).

  2. Add/Less Adjustments:

    • Add back any reserves no longer needed.

    • Subtract losses from past years (if any).

    • Subtract mandatory transfers (like legal reserves).

Formula for Profit Available for Appropriation

Profit Available for Appropriation =  
Net Profit after Tax  
+ Past Reserves (if released)  
- Past Losses  
- Other Adjustments (if any)

Example of Profit Available for Appropriation:

  • Net Profit (after tax): ₹10 lakhs

  • Past Losses: ₹2 lakhs (must be covered first)

  • Profit Available for Appropriation = ₹8 lakhs
    → Can now be used for dividends, reserves, etc.

Why is it required

Why is it required?

  • Shows how much profit is actually free to distribute.

  • Helps shareholders know if dividends are likely.

  • Impacts company’s future plans (growth vs. payouts).

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