Profit and loss Appropriation A/c includes: A. Interest on capitalB.…

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

The Profit and Loss Appropriation Account shows how the net profit is distributed among the partners. Expenses of the business are charged in the Profit and Loss Account before that.

A. Interest on capital — True. It is allowed to partners out of profit and debited to the Appropriation Account.

B. Interest on drawing — True. It is charged to the partners and credited to the Appropriation Account.

C. Partner’s salary — True. Salary to a partner is an appropriation of profit.

D. Rent to partners — False. Rent paid to a partner for the use of his property is a business expense, a charge against profit.

E. Interest on outsider’s loan — False. It is an ordinary expense of the firm, debited to the Profit and Loss Account.

Note: The book’s note prints “change against profits”; it should read “charge against profits”.