Kajal, Neerav and Alisha are partners in a firm sharing profits in the ratio of 3: 2: 1. They decided to admit Rajan, their landlord as a partner in the firm. Rajan brought sufficient amount of capital and his share of goodwill premium. The accountant of the firm passed the entry of rent paid for the building to Rajan in ‘Profit and Loss Appropriation Account’. Is he correct in doing so? Give reason in support of your answer. (Al 2015 C)


No, accountant of the firm is not correct in doing so.
Reason: Because rent paid is a charge against the profit so it should be debited to Profit & Loss Account.

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