Deceased Partner’s Share

Correct answer: A. When the investments are sold and the related risk no longer exists

When the related investments are sold, the risk of fluctuation in their value no longer exists. The Investment Fluctuation Reserve is then distributed among the old partners, including the deceased partner, in the old profit-sharing ratio. It is not distributed merely because the financial year ends or a new partner is admitted. Exam tip: if the investments are retained by the firm, the reserve is generally maintained.

Correct answer: A. The deceased partner’s account will be debited with his share

A revaluation loss is distributed among the old partners in their old profit-sharing ratio. Therefore, the deceased partner’s share of the loss is debited to his capital or current account. In contrast, a revaluation profit is credited to the account. Exam tip: remember that loss is debited and profit is credited.

Correct answer: A. Deceased partner’s capital account

The balance in the deceased partner’s capital account represents the partner’s capital and is included in the final amount payable to the deceased partner. The bank account is affected when payment is made, not when the amount due is determined. Exam tip: First adjust the capital balance in the deceased partner’s capital account; the resulting amount due is then transferred to the executor’s account.

Correct answer: A. साझेदारी विलेख में दिए गए प्रावधान के अनुसार

The deceased partner’s share of profit up to the date of death is calculated according to the specific provision in the partnership deed. A time basis, sales basis, or another method is used only when the deed does not prescribe a particular method. Exam tip: a specific term of the partnership deed overrides the usual method of calculation.

Correct answer: A. Share of goodwill

The deceased partner is entitled to the economic value of his or her share in the firm’s goodwill. Therefore, the share of goodwill is adjusted through the deceased partner’s capital or current account. Profit earned after the date of death is generally not the deceased partner’s entitlement, and the new partner’s capital and the firm’s new sales are unrelated to this claim. Exam tip: the amount due on death may also include reserves, profit up to the date of death, interest on capital, and other agreed entitlements.

Correct answer: A. ₹60,000

Time-based profit = Annual profit × Months elapsed until death / 12. Therefore, ₹2,40,000 × 3/12 = ₹60,000. ₹80,000 would represent four months’ profit, so it is incorrect. In the exam, first form the ratio of elapsed months to 12 and multiply it by the annual profit.

Correct answer: A. This ratio applied up to the date of death

Up to the date of death, the partnership continues under the existing profit-sharing arrangement. Therefore, the deceased partner’s share in the profit earned up to that date is calculated using the old ratio. The new ratio generally applies among the continuing partners after the partner’s death, so options B and D do not state the correct reason. Exam tip: use the old ratio for the period up to death and the revised ratio for the period after death.

Correct answer: A. ₹6,000

The deceased partner is credited with his share of the reserve according to the profit-sharing ratio. Therefore, the amount is ₹24,000 × 1/4 = ₹6,000. ₹8,000 would represent one-third of the reserve, not one-fourth. Exam tip: multiply the total reserve by the deceased partner’s profit-sharing fraction.

Correct answer: A. Accumulated profits

Accumulated profits are credited to the partners’ capital or current accounts in their profit-sharing ratio. Therefore, the deceased partner’s share is credited to their account, increasing the final amount payable. In contrast, accumulated losses and revaluation losses are debited and reduce the amount due. Exam tip: Remember that profits are credited and losses are debited when calculating the deceased partner’s final claim.

Correct answer: A. Principle of economic entitlement

Goodwill represents the value of the firm's reputation, customer base and capacity to earn super profits. Therefore, the deceased partner has an economic entitlement to the partner's share of goodwill, which is included in the amount payable through the partner's Capital Account. Cash basis, matching and conservatism are not the fundamental basis for this adjustment. Exam tip: While calculating the final amount due, include all adjustments up to the date of death, including goodwill, profit up to death and capital balance.

Correct answer: A. 9/12

An accounting year is taken as 12 months. Since the partner died after 9 months, the profit up to the date of death is calculated on a time basis as 9/12 of the annual profit, or three-fourths. The fraction 12/12 represents the entire year and is therefore incorrect. Exam tip: divide the months completed up to death by 12 and multiply by the annual profit.

Correct answer: A. Legal heir

Any amount payable by the firm to a deceased partner—such as capital, share of profit, or other dues—is normally claimed by the partner’s legal heir or legal representative. Therefore, the legal heir is the correct answer. An auditor only examines the accounts, while the bank and customer have no claim to this amount. Exam tip: On a partner’s death, the balance due to the partner is generally transferred or paid to the executor or legal representative.

Correct answer: C. फर्म के भविष्य के वर्षों के अनुमानित लाभ में उसका हिस्सा

The deceased partner is entitled to profit earned up to the date of death, goodwill share and revaluation profit or loss. Future years’ profit has not been earned, so it is excluded. Exam tip: include adjustments only up to the date of death.

Correct answer: A. Share of goodwill

The deceased partner’s share of goodwill is credited to his or her capital or current account because it increases the amount due to that partner. In contrast, accumulated loss and revaluation loss are debited to the partner’s account. An outstanding expense is a liability of the firm and is not normally credited directly to the deceased partner’s account. Exam tip: profits, reserves and the partner’s share of goodwill are generally credited to the deceased partner’s account.

Correct answer: A. The deceased partner’s profit-sharing ratio

To calculate the deceased partner’s share of profit up to the date of death, the first requirement is his or her profit-sharing ratio. This ratio is applied to the estimated profit of the firm to determine the partner’s share. The revised ratio is generally relevant after reconstitution and is not the primary basis for this calculation. Exam tip: First identify the partner’s old profit-sharing ratio, and then consider the period and amount of profit.

Correct answer: A. ₹20,000

The deceased partner’s share in goodwill is calculated as: total goodwill × partner’s share = ₹1,20,000 × \(1/6\) = ₹20,000. Therefore, option A is correct. ₹30,000 represents \(1/4\) of the goodwill, not \(1/6\). In such questions, multiply the total goodwill by the partner’s fraction.

Correct answer: A. Partnership rights cease on the date of death

A partner’s rights and obligations in the partnership end on the date of death. Therefore, the deceased partner is entitled only to the proportionate share of profit earned up to that date; profit earned thereafter belongs to the remaining partners or the reconstituted firm. Option B is incorrect because post-death profit may be estimated—the decisive reason is the cessation of partnership rights. In an exam, restrict the deceased partner’s profit share to the period up to the date of death.

Correct answer: A. Total amount due to the deceased partner

The amount due to a deceased partner is determined from the balance of the partner’s capital account along with goodwill, accumulated profits, the share of profit up to the date of death and other adjustments. After deducting drawings, accumulated losses and other debit amounts recoverable from the partner, the resulting net figure is called the total amount due to the deceased partner. Sales, purchases and cash balance do not represent this claim. Exam tip: add credit items and deduct drawings and other debit items while calculating the final amount due.

Correct answer: A. Profit of the immediately preceding accounting year

The deceased partner’s profit share is generally calculated for the period from the beginning of the current year up to the date of death. Since the actual profit for the current year is not yet available, the profit of the immediately preceding accounting year is commonly used as the estimate because it best reflects the firm’s recent performance. Profit from five years earlier or the first year is less relevant, and profit from just any year cannot be selected arbitrarily. Exam tip: remember “previous year’s profit” as the usual basis for estimating profit up to the date of death.

Correct answer: A. ₹5,000

The deceased partner is credited with his share of the reserve according to the profit-sharing ratio. Calculation: ₹50,000 × 10/100 = ₹5,000. Therefore, option A is correct. Exam tip: Reserve is generally distributed among partners in their profit-sharing ratio unless the question specifies otherwise.

Correct answer: A. Because a partner shares both profits and losses in the profit-sharing ratio

In a partnership, every partner bears both profits and losses in the agreed profit-sharing ratio. Therefore, the deceased partner’s share of accumulated loss is debited to their capital or current account, reducing the amount payable to their legal representative. Option B is incorrect because accounts do not close automatically on death; they must be adjusted properly. Exam tip: accumulated profit is credited, whereas accumulated loss is debited.

Correct answer: A. Both the heir and the firm

The deceased partner’s share may include capital, goodwill, accumulated profits or losses, and profit up to the date of death. Its accurate determination is necessary to make a fair payment to the heir or legal representative and to ascertain the firm’s liability correctly. Therefore, both the heir and the firm are concerned, not merely the bank or the government. Exam tip: The final settlement is made between the firm and the deceased partner’s legal representative.

Correct answer: A. ₹1,20,000

Assuming that profit accrues evenly throughout the year, profit up to the date of death = Annual profit × elapsed-month proportion = \(₹1,80,000 \times \frac{8}{12} = ₹1,20,000\). Option B represents profit for only 6 months. In such questions, use \(\frac{months\ elapsed}{12}\) for time proportion.

Correct answer: A. To adjust the deceased partner’s share in the firm’s reputation and future earning capacity

Goodwill is the intangible value arising from the firm’s reputation, customer loyalty and ability to earn higher future profits. On a partner’s death, the deceased partner is entitled to compensation for their share of the firm’s goodwill according to the partnership deed or the applicable profit-sharing ratio. Therefore, goodwill is adjusted in the amount payable to the deceased partner; it is not a personal expense, a loan, or cash sales. Exam tip: add the deceased partner’s share of goodwill to the final amount due, subject to the partnership agreement.

Correct answer: A. No

When the entire amount due to the deceased partner’s executor is paid immediately, there is no need to open the executor’s loan account. A loan account is opened when the amount due is not paid at once and remains payable in the future. Exam tip: Immediate payment leaves no outstanding balance to be transferred to a loan account.