Question

Is rent paid to a partner appropriation of profits ?

• A. It is appropriation of profit
• B. It is not appropriation of profit
• C. If partner's contribution as capital is maximum
• D. If partner is working partner.

Answer 1

The correct option is B It is not appropriation of profit

Rent is paid for the use of asset of partner in business. Rent paid is an expense for business not as distribution of profit to partners. It is charged to profit and loss account not from profit and loss appropriation account. Rent paid to a partner is charged to profit not appropriation of profit.