Question

Which of the following items, though related to partners, is not an appropriation of profit but rather a charge against profits, and therefore is excluded from the Profit & Loss Appropriation Account?

• A. Interest on Partner's Capital provided as per partnership agreement
• B. Interest on Drawings charged to partners for use of firm's funds
• C. Rent paid to a partner for the use of their property by the firm under a separate contractual arrangement
• D. Partner's Salary allowed as per partnership deed

Hint:

Rent paid to a partner for use of property is: \[ \text{a charge against profits} \] not an appropriation of profit.

Answer 1

The Correct Option is C

Items related to partners are generally classified into:
• Appropriations of profit
• Charges against profit Appropriations of profit are recorded in: \[ \text{Profit \& Loss Appropriation Account} \] Examples:
• Interest on Capital
• Partner's Salary
• Commission to Partners However, rent paid to a partner for use of their property is treated as: \[ \text{a business expense} \] because it arises from a separate contractual arrangement. Therefore it is:
• A charge against profits
• Debited to Profit & Loss Account
• Not transferred to Profit & Loss Appropriation Account Option analysis:
• Option (A): Appropriation of profit
• Option (B): Credited in Appropriation Account
• Option (C): Correct
• Option (D): Appropriation of profit Therefore: \[ \boxed{\text{(C)}} \]