Rent payable to partner is .
Rent payable to partner is .
Solution
Rent payable to a partner is a charge against profits, not an appropriation of profits.
When a partner provides premises or property to the firm for business use, the rent paid is treated as a business expense. This must be recorded before arriving at the net profit of the firm.
Journal Entry:
Rent A/c Dr.
To Partner's Capital/Current A/c
The distinction to understand:
Profit and Loss Account (Debit side) includes:
- Rent to partner
- Interest on partner's loan
- Salary to partner (as an employee)
These are expenses incurred in running the business.
Profit and Loss Appropriation Account (Debit side) includes:
- Interest on partner's capital
- Partner's salary (as per partnership deed)
- Partner's commission
These are distributions of the already calculated profit.
Since rent to partner is an expense that reduces profit, it appears on the debit side of Profit and Loss Account, similar to rent paid to any third party.
Correct Answer: Option 3 - Debited to profit and loss account.
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