Identify the true statement in respect of a partnership firm:
- ARent paid to a partner is a charge and interest on loan from the partner is an appropriation for the firm.
- BRent paid to a partner and Interest on loan from the partner, both are charges for the firm.
- CRent paid to a a partner is an appropriation and interest on loan from the partner is a charge for the firm.
- DRent paid to partner and Interest on loan from the partner, both are appropriations for the firm.
Solution & Step-by-step Explanation
In partnership accounting, payments such as "Rent paid to a partner" and "Interest on a partner's loan" are treated as operating expenses incurred by the firm to use the partner's individual properties/funds. They are legal obligations and are classified as charges against profits (debited to the Profit and Loss Account), meaning they must be paid regardless of whether the firm makes a profit or a loss.