A partnership firm earned a net profit of ₹5,00,000 for the year. Before distributing the profit among partners, it paid the following amounts:

• ₹20,000 as manager’s commission
• ₹30,000 as rent to a partner
• ₹40,000 as interest on a loan taken from a bank
• ₹50,000 as interest on a partner’s capital

Which of the above payments is not a charge against profit?

Interest on Partner's Capital

The correct answer is option 1- Interest on Partner's Capital.

Interest on Partner's Capital is an appropriation of profit. It is debited to profit and loss appropriation account and credited to partner's capital account.

OTHER OPTIONS

• Manager's Commission of ₹20,000 is a charge against profit because it is an expense incurred in the course of running the business. It is debited to profit and loss A/c. 
• Rent to partner of ₹30,000 is also a charge against profit, as it is an expense paid to the partner for using their property for the business. It is debited to profit and loss A/c. 
• Interest on Loan of ₹40,000 is a charge against profit as it represents an expense for borrowing funds. It is debited to profit and loss A/c.