Question

Assertion: Commission allowed to a partner is debited to Profit and Loss Appropriation Account.

Reason: Commission allowed to a partner is treated as a charge against profit.

Which one of the following is correct?

Options

• Both Assertion and Reason are true, and Reason is the correct explanation for Assertion.

• Both Assertion and Reason are true, but Reason is not the correct explanation for Assertion.

• Assertion is true and Reason is false.

• Both Assertion and Reason are false.

Answer 1

Assertion is true and Reason is false.

Explanation:

The assertion is true because any commission paid to a partner is considered a distribution of profit, which is why it is correctly debited to the Profit and Loss Appropriation Account. On the other hand, the reason is false because partner commission is an appropriation rather than a charge against profit; a charge is a mandatory expense, like rent or interest, that must be paid even if the firm suffers a loss, whereas an appropriation is paid only out of available profits.