Accountancy Part AAccounting for Partnership

Following are considered as appropriations out of profits. (A) Rent p…

Following are considered as appropriations out of profits.

(A) Rent paid to partners

(B) Interest on capital

(D) Commission allowed to partners

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → (B), (C) and (D) only

An appropriation is a share of the profit given to the partners for their capital or their work; it is made only when there is a profit. A charge is an expense the firm must pay whether it earns a profit or not.

(A) Rent paid to partners — not an appropriation: rent for a partner’s building used by the firm is an expense, a charge against profit, debited to the Profit and Loss Account.
(B) Interest on capital — an appropriation, shown in the Profit and Loss Appropriation Account.
(C) Salary paid to partners — an appropriation, shown in the Profit and Loss Appropriation Account.
(D) Commission allowed to partners — an appropriation, shown in the Profit and Loss Appropriation Account.

NCERT (2026-27 edition):
Profit and Loss Appropriation Account – “Profit and Loss Appropriation Account is merely an extension of the Profit and Loss Account of the firm. It shows how the profits are appropriated or distributed among the partners. All adjustments in respect of partner’s salary, partner’s commission, interest on capital, interest on drawings, etc. are made through this account.”

NCERT (2026-27 edition):
Test your Understanding – “… Note: Payment of Rent to Reena is an expense for the business. Hence, it is change against profits.”