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Kajal, Neerav and Aisha 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'. Choose the correct option for the approach of accountant.
- a)Accountant of the firm is correct in doing so.
- b)No, accountant of the firm is not correct in doing so.
- c)Accountant is correct but his approach could be more appropriate.
- d)None of the above
Correct answer is option 'B'. Can you explain this answer?
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Verified Answer
Kajal, Neerav and Aisha are partners in a firm sharing profits in the ...
Rent paid is not an appropriation of profit, instead it is a charge against profit, thus it should be debited to Profit and Loss Account.
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Kajal, Neerav and Aisha are partners in a firm sharing profits in the ...
Approach of Accountant in the given scenario
The given scenario involves the admission of a new partner, Rajan, in the existing partnership firm. The existing partners are Kajal, Neerav, and Aisha, who share profits in the ratio of 3:2:1. Rajan brings in sufficient capital and his share of goodwill premium, and he is also the landlord of the building where the firm operates.
The accountant of the firm has passed the entry of rent paid for the building to Rajan in the Profit and Loss Appropriation Account. This approach of the accountant is not correct, and the correct option is 'B'.
Explanation
The reason why the approach of the accountant is not correct is as follows:
- Rent is a charge against profits and not an appropriation of profits. Hence, it should be debited to the Profit and Loss Account and not to the Profit and Loss Appropriation Account. The Profit and Loss Appropriation Account is used for the distribution of profits among the partners.
- Rajan is the landlord of the building and a new partner in the firm. Hence, he cannot receive rent from the firm. Instead, he should receive a share of profits in the ratio agreed upon by the partners.
- The entry passed by the accountant implies that Rajan is receiving rent from the firm, which is not correct. It also implies that the rent paid to Rajan is an appropriation of profits, which is also not correct.
Conclusion
In conclusion, the approach of the accountant in passing the entry of rent paid to Rajan in the Profit and Loss Appropriation Account is not correct. The correct approach would be to debit the rent paid to the Profit and Loss Account and credit Rajan's Capital Account or Current Account with his share of profits as agreed upon by the partners.
The given scenario involves the admission of a new partner, Rajan, in the existing partnership firm. The existing partners are Kajal, Neerav, and Aisha, who share profits in the ratio of 3:2:1. Rajan brings in sufficient capital and his share of goodwill premium, and he is also the landlord of the building where the firm operates.
The accountant of the firm has passed the entry of rent paid for the building to Rajan in the Profit and Loss Appropriation Account. This approach of the accountant is not correct, and the correct option is 'B'.
Explanation
The reason why the approach of the accountant is not correct is as follows:
- Rent is a charge against profits and not an appropriation of profits. Hence, it should be debited to the Profit and Loss Account and not to the Profit and Loss Appropriation Account. The Profit and Loss Appropriation Account is used for the distribution of profits among the partners.
- Rajan is the landlord of the building and a new partner in the firm. Hence, he cannot receive rent from the firm. Instead, he should receive a share of profits in the ratio agreed upon by the partners.
- The entry passed by the accountant implies that Rajan is receiving rent from the firm, which is not correct. It also implies that the rent paid to Rajan is an appropriation of profits, which is also not correct.
Conclusion
In conclusion, the approach of the accountant in passing the entry of rent paid to Rajan in the Profit and Loss Appropriation Account is not correct. The correct approach would be to debit the rent paid to the Profit and Loss Account and credit Rajan's Capital Account or Current Account with his share of profits as agreed upon by the partners.
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Kajal, Neerav and Aisha 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. Choose the correct option for the approach of accountant.a)Accountant of the firm is correct in doing so.b)No, accountant of the firm is not correct in doing so.c)Accountant is correct but his approach could be more appropriate.d)None of the aboveCorrect answer is option 'B'. Can you explain this answer?
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Kajal, Neerav and Aisha 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. Choose the correct option for the approach of accountant.a)Accountant of the firm is correct in doing so.b)No, accountant of the firm is not correct in doing so.c)Accountant is correct but his approach could be more appropriate.d)None of the aboveCorrect answer is option 'B'. Can you explain this answer? for Class 12 2024 is part of Class 12 preparation. The Question and answers have been prepared according to the Class 12 exam syllabus. Information about Kajal, Neerav and Aisha 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. Choose the correct option for the approach of accountant.a)Accountant of the firm is correct in doing so.b)No, accountant of the firm is not correct in doing so.c)Accountant is correct but his approach could be more appropriate.d)None of the aboveCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Class 12 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Kajal, Neerav and Aisha 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. Choose the correct option for the approach of accountant.a)Accountant of the firm is correct in doing so.b)No, accountant of the firm is not correct in doing so.c)Accountant is correct but his approach could be more appropriate.d)None of the aboveCorrect answer is option 'B'. Can you explain this answer?.
Kajal, Neerav and Aisha 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. Choose the correct option for the approach of accountant.a)Accountant of the firm is correct in doing so.b)No, accountant of the firm is not correct in doing so.c)Accountant is correct but his approach could be more appropriate.d)None of the aboveCorrect answer is option 'B'. Can you explain this answer? for Class 12 2024 is part of Class 12 preparation. The Question and answers have been prepared according to the Class 12 exam syllabus. Information about Kajal, Neerav and Aisha 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. Choose the correct option for the approach of accountant.a)Accountant of the firm is correct in doing so.b)No, accountant of the firm is not correct in doing so.c)Accountant is correct but his approach could be more appropriate.d)None of the aboveCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Class 12 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Kajal, Neerav and Aisha 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. Choose the correct option for the approach of accountant.a)Accountant of the firm is correct in doing so.b)No, accountant of the firm is not correct in doing so.c)Accountant is correct but his approach could be more appropriate.d)None of the aboveCorrect answer is option 'B'. Can you explain this answer?.
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Kajal, Neerav and Aisha 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. Choose the correct option for the approach of accountant.a)Accountant of the firm is correct in doing so.b)No, accountant of the firm is not correct in doing so.c)Accountant is correct but his approach could be more appropriate.d)None of the aboveCorrect answer is option 'B'. Can you explain this answer?, a detailed solution for Kajal, Neerav and Aisha 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. Choose the correct option for the approach of accountant.a)Accountant of the firm is correct in doing so.b)No, accountant of the firm is not correct in doing so.c)Accountant is correct but his approach could be more appropriate.d)None of the aboveCorrect answer is option 'B'. Can you explain this answer? has been provided alongside types of Kajal, Neerav and Aisha 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. Choose the correct option for the approach of accountant.a)Accountant of the firm is correct in doing so.b)No, accountant of the firm is not correct in doing so.c)Accountant is correct but his approach could be more appropriate.d)None of the aboveCorrect answer is option 'B'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Kajal, Neerav and Aisha 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. Choose the correct option for the approach of accountant.a)Accountant of the firm is correct in doing so.b)No, accountant of the firm is not correct in doing so.c)Accountant is correct but his approach could be more appropriate.d)None of the aboveCorrect answer is option 'B'. Can you explain this answer? tests, examples and also practice Class 12 tests.
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