Deceased Partner’s Share

The direct answer is A: the average of past profits. When a partner dies during the accounting year, the exact profit for the whole year is usually not yet known. The firm therefore estimates the deceased partner’s share up to the date of death using a reasonable basis stated in the partnership agreement or customary accounting practice. The commonly used basis is the average profit of previous years, often adjusted if the question provides special information. Option A is correct. Option B is less appropriate because an estimate based only on the current year may be uncertain and is not the usual general basis. Option C is wrong because cash balance is an asset or liquidity figure, not profit. Option D is wrong for the same reason; bank balance does not measure earned profit. Always distinguish profit from cash or bank balances.

Profit up to the date of death is estimated using the time ratio. The ratio for 3 months is \(3/12\), so the profit is ₹1,20,000 × \(3/12\) = ₹30,000. ₹40,000 represents four months, while ₹20,000 represents two months. Exam tip: if the deceased partner’s profit-sharing ratio is also given, multiply ₹30,000 by that ratio to find the partner’s actual share.

Until the date of death, the deceased person remains a partner and co-owner of the firm. Therefore, his proportionate share of the profit earned up to that date is credited to his capital or current account, or to the account of his executor. Being a lender or an employee does not create a right to share in partnership profits. Exam tip: Calculate the deceased partner’s profit share only for the period up to the date of death, not automatically for the entire year.

When profit is assumed to accrue uniformly throughout the year, the annual profit is apportioned up to the date of death using the time ratio. For example, if death occurs after 3 months, the usual share of profit up to death is 3/12 of the annual profit. A sales ratio may be used when profits vary significantly with sales or seasonality. Exam tip: select the time ratio when the question states that profit accrues uniformly or is to be apportioned by time.

Estimated profit up to the date of death = average annual profit × proportion of months elapsed. Therefore, ₹2,40,000 × 9/12 = ₹1,80,000. ₹1,20,000 would represent only 6 months’ profit, while ₹90,000 would represent 4.5 months’ profit. In the examination, first check that the time ratio is based on a 12-month accounting year.

The deceased partner’s share of profit up to the date of death is credited to the partner’s capital account or Profit and Loss Adjustment Account and is ultimately payable to the deceased partner’s executor. Therefore, it is a liability of the firm, not its income or asset. Exam tip: any amount payable to the deceased partner or the executor is treated as a liability.

The deceased partner’s share is calculated on the profit earned from the beginning of the current accounting year up to the date of death. The partnership deed may prescribe the estimation method, such as the average profit of past years or a sales-based method. Profit earned after death belongs to the continuing or reconstituted firm, so calculation up to the year-end is not compulsory. Exam tip: remember “up to the date of death” as the final limit for the deceased partner’s profit share.

Estimated profit up to the date of death = previous year’s annual profit × the proportion of months elapsed. Thus, ₹3,60,000 × 2/12 = ₹60,000. ₹30,000 represents only one month’s profit, so it is incorrect. In such questions, multiply annual profit by the elapsed months divided by 12.

The deceased partner earns a share of the firm’s profit up to the date of death. This share is credited to the deceased partner’s capital or current account and forms part of the total amount payable to the legal representative. The new profit-sharing ratio relates to the continuing partners after the death, not to the primary purpose of this calculation. Exam tip: Always include profit up to the date of death while settling the deceased partner’s claim.

Estimated firm profit up to the date of death = ₹1,80,000 × 8/12 = ₹1,20,000. The deceased partner’s share is ₹1,20,000 × 1/3 = ₹40,000, so option C is correct. Option A represents the total firm profit up to death, not the deceased partner’s share. Exam tip: first calculate the firm’s profit for the elapsed period and then apply the partner’s profit-sharing ratio.

The deceased partner’s share of profit earned up to the date of death is credited to the deceased partner’s Capital or Current Account and is ultimately payable to the legal representative(s). An incoming partner has no claim over profits earned before joining the reconstituted firm. Exam tip: Distinguish profit accrued up to the date of death from future profits.

Profit up to the date of death = Annual profit × proportion of months elapsed = ₹4,80,000 × 5/12 = ₹2,00,000. Option C, ₹2,40,000, represents profit for six months and is therefore incorrect. Exam tip: when profit is assumed to accrue evenly, apply the time ratio first; multiply the resulting profit by the deceased partner’s profit-sharing ratio if the partner’s share is required.

The deceased partner’s profit up to the date of death is generally estimated by applying a time proportion to the previous year’s profit. For example, if death occurs partway through the year, the profit corresponding to the elapsed months is calculated. Capital balance, cash balance and drawings are not measures of profit. In an examination, check whether the partnership deed specifically prescribes an average-profit or sales basis; if so, that agreed basis is followed.

Profit share up to the date of death = Annual profit share × proportion of the year elapsed = ₹96,000 × 6/12 = ₹48,000. Therefore, option A is correct. ₹24,000 represents 3 months’ profit, ₹72,000 represents 9 months’ profit, and ₹96,000 represents the full year’s profit. Exam tip: For profit up to retirement or death, multiply the annual profit by the elapsed months divided by 12.

The deceased partner’s share of profit up to the date of death is credited to the partner’s capital account. This credit increases the account’s balance and consequently increases the amount payable to the deceased partner’s executor. Therefore, option A is correct. Remember that closing the capital account is a subsequent settlement step, not the direct effect of crediting profit.

Profit up to the date of death = Estimated annual profit × fraction of the year elapsed = ₹6,00,000 × 4/12 = ₹2,00,000. ₹1,50,000 represents 3 months’ profit, while ₹3,00,000 represents 6 months’ profit. In such questions, divide the elapsed months by 12 to apportion annual profit.

The date of death fixes the closing point of the period from the beginning of the accounting year or the date of the last accounts up to which profit must be estimated. The deceased partner’s profit-sharing ratio is then applied to the profit attributable to this period. The office address, number of employees and bank branch do not determine the relevant period. Exam tip: treat the date of death as the cut-off date for calculating profit up to death.

Estimated profit up to the date of death = Annual profit × fraction of the year elapsed = ₹7,20,000 × 7/12 = ₹4,20,000. Option B represents profit for only 6 months, so it is incorrect. Exam tip: For time-apportioned profit, multiply the annual profit by months elapsed/12.

The deceased partner’s proportionate share of profit earned up to the date of death is credited to the partner’s capital or current account and forms part of the amount payable to the executor. This ensures a fair determination of the rights of the continuing partners and the deceased partner’s legal representatives. The fixed capital principle is only an accounting arrangement, and the liquidation principle does not apply when the firm continues its business. Exam tip: Profit up to the date of death is commonly estimated using time, sales, or another agreed basis.

For a 12-month accounting year, the estimated profit for 10 months is ₹3,00,000 × 10/12 = ₹2,50,000. Therefore, option A is correct. ₹3,00,000 represents the annual average profit, so using it without proportioning for 10 months (option D) is incorrect. Remember that this is the firm’s profit; the deceased partner’s individual share would additionally require the profit-sharing ratio.

The deceased partner’s share of profit earned up to the date of death is credited to that partner’s Capital Account, increasing the amount payable. The balance is settled subsequently. Purchases and Sales Accounts are not used for this adjustment; the Cash Account is affected only when payment is made. Exam tip: Under the fluctuating-capital method, such adjustments are made through the Capital Account, whereas under the fixed-capital method they are generally made through the Current Account.

Profit share up to death = Full-year profit share × fraction of the year elapsed = ₹2,64,000 × 11/12 = ₹2,42,000. Option B uses 10/12 of the year, while option D takes the entire 12-month profit, so both are incorrect. Exam tip: when profit accrues evenly, calculate the deceased partner’s share in proportion to the time elapsed.

The deceased partner’s share of profit is generally calculated for the period from the beginning of the accounting year up to the date of death. After death, the person is no longer a partner, so profit for the post-death period is not included in the deceased partner’s share. Options B and C describe the eligible period; the exam tip is to calculate the share only up to the date of death.

Profit up to the date of death = Annual profit × proportion of the elapsed period × the partner’s profit-sharing ratio. Thus, ₹8,40,000 × 1/12 × 1 = ₹70,000. The other amounts do not represent the correct one-month proportion of the annual profit. Exam tip: For death during the year, first calculate the time proportion as elapsed months/12 and then apply the deceased partner’s profit-sharing ratio.

The average of previous years’ profits reduces the effect of abnormally high or low profits and estimates the normal profit expected up to the date of death in the current year. Thus, the deceased partner’s share is generally calculated as average profit × period up to death × the partner’s profit-sharing ratio. Capital, asset values and cash balance are not the basis of this estimate. Exam tip: Unless a specific trend or weighted average is prescribed, use the simple average of past profits.