Appropriations
Under this head, the net profit/ loss for the year as well as profit/ loss brought forward have to be shown. The appropriations of the aggregate thereof are to be shown under the following heads:
(a) Transfer to Statutory Reserves.
(b) Transfer to Capital Reserves.
(c) Transfer to Investment Fluctuation Reserve.
(d) Transfer to Debenture Redemption Reserve.
(e) Transfer to Other Reserves.
(f) Transfer to Government/ Proposed Dividend.
(g) Transfer to Tax on Dividend.
The appropriations of profits are decided at the head office level. This item would not therefore appear in the profit and loss account at the branch level.
The central statutory auditor should therefore verify compliance with the statutory requirement regarding transfers to reserve accounts and the other appropriation as applicable will have to be taken into consideration while verifying these. According to RBI circular RBI/2006-07/132 DBOD.BP.BC No. 31 / 21.04.018/ 2006-07 dated 20th September 2006 all expenses including provisions and writeoffs recognized in a period, whether mandatory or prudential, should be reflected in the profit and loss account for the period as an ‘above the line’ item (i.e. before arriving at the net profit).