Question

Is rent paid to a partner appropriation of profits?

Options

• It is appropriation of profit.

• It is not appropriation of profit.

• If partner’s contribution as capital is maximum.

• If partner is a working partner.

Answer 1

It is not appropriation of profit.

Explanation:

Rent paid to a partner is treated as a charge against profit because it is paid for the use of property, not for ownership rights in the firm. Hence, it is debited to the Profit and Loss Account, not to the Profit and Loss Appropriation Account. Therefore, it is not appropriation of profit.