Deceased Partner’s Share

The governing concept is that the deceased partner is entitled to the firm’s goodwill multiplied by that partner’s profit-sharing fraction. Therefore, the executor’s goodwill entitlement is ₹252,000 × 5/18. Divide ₹252,000 by 18 to get ₹14,000, and multiply by 5: ₹14,000 × 5 = ₹70,000. This amount is credited to the deceased partner’s Executor’s Account because it forms part of the amount payable to the legal representative. Option B is correct. ₹56,000 would represent 4/18, ₹84,000 would represent 6/18, and ₹90,000 does not follow the stated fraction.

The governing concept is that a partner’s share of goodwill is an economic entitlement arising from the reputation and earning capacity built during the partnership. On death, this entitlement does not disappear; it becomes payable to the deceased partner’s executor or legal representative. Crediting the Executor’s Account records the firm’s obligation and increases the amount payable. Option A is therefore correct. The entry does not create sales revenue, so B is wrong. It does not itself bring cash into the firm, so C is wrong. Reducing old goodwill is a separate accounting action, if required, and does not explain the credit to the executor account; hence D is wrong.

It is calculated to determine the amount payable to the deceased partner. Exam questions often test this objective.

The deceased partner is entitled to a share of profit for the period from the beginning of the accounting year up to the date of death, and this amount is credited to the deceased partner’s account. Profit for the full year or up to the date of closing the books is not taken as the deceased partner’s share. Exam tip: the profit up to death is usually estimated using past profits or another agreed basis.

It is generally estimated in proportion to the previous year's profit. This rule is frequently tested.

Accumulated profits are undistributed profits earned by the firm before the partner’s death. Since the deceased partner was entitled to his agreed share in those profits, that share must be transferred to the deceased partner’s capital account or current account, according to the firm’s accounting system. This increases the amount payable to his executor or legal representative. Therefore, option A is correct. The profits are not ignored, because doing so would understate the partner’s claim. They are not sent directly to a bank, and a new partner has no automatic right to profits earned before joining the firm. The adjustment is normally made through the Profit and Loss Appropriation or related adjustment account.

General reserve represents accumulated profits, so it is distributed among all partners in the old profit-sharing ratio. The deceased partner’s share is credited to the deceased partner’s Capital Account and becomes part of the amount due to the estate. It is not distributed only among the surviving partners or transferred directly to the Executor’s Loan Account. Exam tip: For retirement or death adjustments, distribute existing reserves in the old profit-sharing ratio.

Goodwill is an intangible asset representing the firm’s reputation and its capacity to earn profits. At the time of death, the deceased partner is entitled to his share of goodwill in the profit-sharing ratio, so that amount is credited to his Capital Account. The continuing partners generally bear this amount in their gaining ratio. Exam tip: In a goodwill adjustment, the deceased partner’s account is credited and the gaining partners’ accounts are debited.

A partner’s capital account records the capital introduced into the firm, together with later permanent adjustments such as the partner’s share of accumulated profits, reserves, revaluation profit or loss, and other agreed items. At the date of death, the resulting credit balance generally represents the capital amount standing to the deceased partner’s credit, before all other final claims are added. Thus option A is the best answer. It does not mean the entire profit of the firm; profit is distributed among partners according to the agreement. It is also not a bank loan, because a bank loan is an external liability, nor is it an expense, which is a charge against profit. The final amount due may additionally include goodwill, profit up to the date of death, and interest or salary if applicable.

When the partnership deed does not provide a different method and profits are assumed to accrue evenly throughout the year, the deceased partner’s estimated profit up to the date of death is calculated on a time basis. For example, the estimated annual profit is apportioned according to the number of months completed up to the date of death. Dividing the whole-year profit equally or using only the capital balance is incorrect. In the exam, first identify the period up to death and express it as a proportion of the full accounting year.

Revaluation profit is distributed among all the old partners, including the deceased partner, in the old profit-sharing ratio. The deceased partner’s share is credited to their capital or current account, increasing the amount payable to the executor as at the date of death. It is not deposited in the bank because it is an accounting adjustment, not a cash receipt. Exam tip: Allocate revaluation profit or loss among the old partners in their old ratio up to the date of death.

After the necessary adjustments, the amount due to the deceased partner is payable to the partner’s executor. If the firm does not settle this amount immediately, it is transferred to the deceased partner’s loan account, which represents the firm’s outstanding liability and is paid later. Option C is incorrect because the amount is not fresh capital; it is an amount already due. Exam tip: Transfer the amount due to the deceased partner’s loan account when immediate settlement is not made.

The total profit-sharing ratio is 3 + 2 = 5. Therefore, A’s share = A’s ratio ÷ total ratio = 3/5. Option B, 2/5, represents B’s share, not A’s. In exams, divide a partner’s ratio by the sum of all partners’ ratios to find that partner’s profit share.

The estimated profit up to the date of death is calculated in proportion to the time elapsed. Thus, estimated profit = ₹1,20,000 × 6/12 = ₹60,000. ₹1,20,000 represents the profit for the full year, whereas 6 months represent half of the year. In such questions, always apply the time-proportion method.

Undistributed profits, such as a general reserve or a credit balance in the Profit and Loss Account, are accumulated rights of the partners. Therefore, the deceased partner’s share is credited to his Capital or Current Account in the old profit-sharing ratio, increasing the amount payable to his estate. It is not treated as an expense or deducted from the other partners’ accounts. Exam tip: accumulated profits are credited in the old ratio, while accumulated losses are debited in the old ratio.

The deceased partner’s share of accumulated losses is debited to the capital account because it reduces the partner’s capital. In contrast, the share of general reserve, goodwill, and profit up to the date of death is generally credited to the account. Exam tip: Items that reduce a partner’s capital, such as losses and drawings, are debited.

The deceased partner’s final account incorporates items such as the capital balance, current account balance, share of goodwill, revaluation profit or loss, and share of profit up to the date of death. Its main purpose is therefore to ascertain the total amount due to the deceased partner or the legal representative. Bank reconciliation, stock counting, and auditing are separate accounting activities. Exam tip: In death-of-a-partner questions, include all adjustments up to the date of death while determining the amount due.

The deceased partner's share of goodwill is calculated as: total goodwill × the partner's profit-sharing ratio. Thus, ₹90,000 × 1/3 = ₹30,000, so option A is correct. For exams, multiply the firm's total goodwill by the deceased partner's ratio; do not divide it by the number of partners unless their ratio is equal.

A deceased partner’s share of profit is calculated for the period from the beginning of the accounting year up to the date of death, because the partner is no longer entitled to the firm’s profits after that date. The amount is generally estimated proportionately using the previous year’s profit or sales. Therefore, granting profit for the entire year would be incorrect. In exams, restrict the deceased partner’s profit share to the period up to the date of death.

The legal heir is paid the amount due to the deceased partner after all necessary account adjustments. This may include capital, current account balance, goodwill, the share of profit up to the date of death, and other adjustments, while drawings and liabilities are deducted. The new profit-sharing ratio only determines the future distribution of profit among the continuing partners. Exam tip: first calculate the deceased partner’s amount due, and then settle it with the legal heir.

When a partner dies during the accounting year, the actual profit for the period up to the date of death is not yet available. Therefore, the profit for that period is estimated using past profits, sales, or time proportion, and the deceased partner’s share is calculated from it. Once the year is completed and actual profit is known, estimation is unnecessary. Exam tip: For the year of death, profit is generally estimated up to the date of death.

The deceased partner’s settlement generally includes capital, goodwill, reserves and the share of profit earned up to the date of death. Profits earned after death do not belong to the deceased partner and are therefore not added to the amount due. Exam tip: Calculate the profit share only up to the date of death, not for the period after it.

The deceased partner’s share of profit = Total profit × Partner’s profit-sharing ratio = ₹72,000 × \(1/4\) = ₹18,000. Therefore, option A is correct. Option B, ₹24,000, represents \(1/3\) of the profit, not \(1/4\). In the exam, multiply the total profit by the partner’s profit-sharing ratio.

When the amount due to a deceased partner is not paid immediately, it is transferred to the loan account of the deceased partner’s executor. The amount is initially determined through the partner’s capital account, but any unpaid balance is shown as a liability in the executor’s loan account. Exam tip: Link ‘not paid immediately’ with the Executor’s Loan Account.

The deceased partner’s share of profit up to the date of death is calculated using the old profit-sharing ratio, because that ratio remains applicable until the reconstitution takes effect. The new ratio applies to the continuing partners after reconstitution, while the sacrificing and gain ratios are used for other reconstitution adjustments. Exam tip: use the old ratio for the period before death and the new ratio for the period after death.