Question

Assertion (A): Salary allowed to a partner is shown in Profit and Loss Appropriation A/c.

Reason (R): Salary is allowed to a partner only when there is a provision for the same in the partnership deed.

In the context of the above statements, which of the following is correct?

Options

• (A) is correct, but (R) is incorrect.

• Both (A) and (R) are correct.

• (A) is incorrect, but (R) is correct.

• Both (A) and (R) are incorrect.

Answer 1

Both (A) and (R) are correct.

Explanation:

Salary allowed to a partner is shown in the Profit and Loss Appropriation Account because it is considered an appropriation of profit rather than a charge against profit. Therefore, such a salary is not recorded in the Profit and Loss Account but is instead shown in the Profit and Loss Appropriation Account. Additionally, a salary is allowed to a partner only when there is a specific provision for it in the partnership deed. According to the Indian Partnership Act, 1932, in the absence of a partnership deed or if the deed is silent on the matter, no salary is payable to any partner.