This topic is a part of the UNIT Fundamentals of Partnership Class 12 according to the CBSE curriculum.
It is a charge against profits and not an appropriation out of profits. It is debited to profit and loss account and credited to partner’s current accounts (in case of fixed capitals) or to partner’s capital accounts (when capitals are fluctuating). Alternatively, it can also be paid in cash.
Journal Entries relating to Rent Paid to a Partner
| If rent is credited to partner’s capital account | Rent A/c Dr To Partner’s Capital/Current A/c |
| If rent is paid in cash | Rent A/c Dr To Cash/Bank A/c |
| For transferring rent to profit and loss account | Profit and Loss A/c Dr To Rent A/c |
Q. Arun and Varun are partners sharing profits in the ratio of 3:2 with capitals of 40,000 and 30,000 respectively. Arun is allowed a rent of 10,000 per annum and Varun is allowed a rent of 1000 per month for allowing the firm to carry on the business in their premises. The profits before any interest for the year amounted to 40,000. Prepare Profit and Loss A/c to asceratin the amount of distributable profits.
SOLUTION:
| Particulars | Amount | Particulars | Amount |
| To Rent A/c Arun 10000 Varun (1000 x 12) To P&L Approp. | 22,000 18,000 | By Profit before Interest | 40,000 |
Read more from Fundamentals of Partnership
Profit and Loss Appropriation Account
Salary or commission paid to a partner
Rent paid to partner and Interest on loan
