Question

Pick the odd one out of the following:

1. Interest allowed on a loan taken by the firm from a partner.
2. Rent is due to a partner of the firm for using his premises for business purposes.
3. Salary due to the manager of the firm.
4. Transfer of General Reserve

Answer 1

Transfer of General Reserve

Explanation:

Because it is an appropriation of profit, not a charge against profit like the other items.

Interest on a partner’s loan, rent to a partner, and a manager’s salary are business expenses and are recorded in the Profit and Loss Account as charges. But transferring an amount to the General Reserve is done after profit is determined in the Profit and Loss Appropriation Account. Hence, it stands out.