Select the correct statements from the following related to the partn…

Select the correct statements from the following related to the partnership.

(A) Rent paid to a partner is always an appropriation of profit.

(B) Interest on Loan from Partner is always a charge against profit.

(D) Interest on Loan to Partner is not a charge against profit.

Choose the correct statements from the given options below :-

Answer & explanation

Correct answer: option 1

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

A charge against profit is an expense deducted before profit is found; an appropriation of profit is a division of profit already found.

(A) Rent paid to a partner is always an appropriation of profit. Incorrect. Rent paid to a partner for premises the firm uses is a business expense, so it is a charge against profit, payable whether or not there is a profit.

(B) Interest on Loan from Partner is always a charge against profit. Correct. The partner is a lender here, so the interest is an expense even in a year of loss.

(C) Interest on Partner's Capital is an appropriation of profit. Correct. It is a share of profit given to partners for the capital they put in, and it is debited to the Profit and Loss Appropriation Account.

(D) Interest on Loan to Partner is not a charge against profit. Correct. Here the firm is the lender, so the interest is income of the firm, not an expense.

NCERT (2026-27 edition):
Profit and Loss Appropriation Account – “… Note: Payment of Rent to Reena is an expense for the business. Hence, it is change against profits.”

NCERT (2026-27 edition):
Provisions of Partnership Act Relevant for Accounting – “… (d) Interest on Loan: If any partner has advanced loan to the firm for the purpose of business, he/she shall be entitled to get an interest on the loan amount at the rate of 6 per cent per annum.”

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.”