Deceased Partner’s Share

Correct answer: A. Rights and interests accrued up to the date of death

A deceased partner’s claim is based on the rights and interests accrued up to the date of death, such as the proportionate share of profit, goodwill, revaluation results, and accumulated profits or reserves. Profits likely to be earned after death generally do not form the basis of the claim. Exam tip: calculate the deceased partner’s share only up to the date of death, not automatically for the entire accounting year.

Correct answer: A. Balance of the deceased partner’s capital account

The balance of the deceased partner’s capital account is ordinarily included in the final settlement. Depending on the partnership agreement, the settlement may also include adjustments for goodwill, accumulated reserves or losses, and the deceased partner’s share of profit up to the date of death. Income earned after death or profit from future sales is not automatically payable to the deceased partner. Exam tip: calculate the settlement with reference to the partner’s rights up to the date of death.

Correct answer: A. It determines the cut-off for profits and other adjustments up to the date of death

The date of death acts as the accounting cut-off date. The deceased partner’s share is determined in profits or losses, goodwill, revaluation, accumulated profits, and other required adjustments up to that date. The partner has no claim over profits or losses arising after death. Option D is incorrect because death generally results in reconstitution of the firm, not necessarily its dissolution. Exam tip: calculate the deceased partner’s share of profit only up to the date of death.

Correct answer: A. Share of profit earned up to the date of death

The deceased partner is entitled to his share of the profit earned by the firm up to the date of death. Therefore, this amount is credited to the deceased partner’s capital account. Profit or loss arising after the date of death is generally not added to that account. Exam tip: Profit up to the date of death may be estimated on the basis of time or sales.

Correct answer: A. Provision specified in the partnership deed

When the partnership deed specifies a method for calculating profit up to the date of death, that method must be followed. An estimate based on the previous year may be used only when the deed does not provide a specific method. The new ratio or equal distribution does not apply automatically. In an exam, check the deed’s provisions first.

Correct answer: A. It represents a share of accumulated profits of past years

General reserve is created from profits accumulated in previous years and not yet distributed among the partners. Therefore, at the time of a partner’s retirement or death, it is credited to all partners’ capital accounts, including the deceased partner’s account, in the old profit-sharing ratio. It is not an external liability or an expense. Exam tip: adjust general reserve in the old profit-sharing ratio.

Correct answer: A. To adjust their share in the firm’s goodwill

Goodwill represents the firm’s intangible value arising from its reputation, customer relationships and future earning capacity. Therefore, the deceased partner is entitled to their share of the firm’s goodwill, which is credited to their capital account. The partners who gain from the new profit-sharing ratio generally bear this adjustment through their capital accounts. Repaying a bank loan, recording tax liability or settling drawings is not the purpose of this goodwill adjustment. Exam tip: On retirement or death, credit the outgoing partner’s share of goodwill to their account.

Correct answer: A. ₹63,000

The estimated profit up to the date of death is calculated in proportion to the elapsed time: ₹84,000 × 9/12 = ₹63,000. Therefore, option A is correct. ₹42,000 represents profit for only 6 months, whereas the relevant period is 9 months. In exams, multiply the previous year’s profit by the number of months elapsed divided by 12.

Correct answer: A. Old profit-sharing ratio

The deceased partner’s share of profit up to the date of death is calculated using the old profit-sharing ratio, because that ratio was applicable before the partner’s death. The new ratio applies only after the firm is reconstituted and therefore cannot be used for the pre-death period. Exam tip: use the old ratio for the period up to death and the new ratio for the period after death.

Correct answer: A. It will be debited

Accumulated loss represents a debit balance of the Profit and Loss Account. The deceased partner’s share of this loss is debited to the partners’ capital accounts in their profit-sharing ratio, thereby reducing the deceased partner’s capital. In contrast, accumulated profits are credited. Exam tip: remember accumulated profit = credit and accumulated loss = debit.

Correct answer: A. A component of the final amount due to the deceased partner

The final amount due to a deceased partner is calculated by adjusting the balance of the partner’s capital account for items such as the share of goodwill, accumulated profits or losses, and profit up to the date of death. Therefore, ₹1,10,000 capital is a major component of this final amount. It is not a component of total sales, stock value, or loan repayment. Exam tip: the final amount due is not always equal to capital alone; all relevant adjustments must be considered.

Correct answer: A. ₹30,000

The deceased partner's share of goodwill is calculated as ₹1,50,000 × \(1/5\) = ₹30,000. Therefore, ₹30,000 is due to the deceased partner's estate. The closest distractor, ₹25,000, represents one-sixth of the goodwill, not one-fifth. Exam tip: multiply the total goodwill by the partner's fraction of the share.

Correct answer: A. Because the legal heir becomes entitled to the amount due to the deceased partner from the firm

On a partner’s death, the amount due to the partner is determined after considering items such as the capital account, current account, goodwill, accumulated profits and the share of profit up to the date of death. This amount is paid to the legal heir because the heir represents the deceased partner’s estate and rights. The heir does not automatically become a new partner; admission requires the consent of the partners. Exam tip: payment is made to settle the deceased partner’s entitlement, not to admit the heir as a partner.

Correct answer: A. Credited to the deceased partner’s Capital Account

Revaluation profit is distributed among all partners, including the deceased partner, in the old profit-sharing ratio. Therefore, the deceased partner’s share is credited to the deceased partner’s Capital Account. Subsequently, the total amount due may be transferred to the executor’s Loan Account; it is not credited there as the initial treatment. Exam tip: Revaluation profit or loss is distributed in the old profit-sharing ratio.

Correct answer: A. ₹20,000

The deceased partner’s share of profit = ₹1,00,000 × 20/100 = ₹20,000. Therefore, ₹20,000 will be credited to the deceased partner’s account. The other amounts correspond to 10%, 15% and 25%, not 20%. Exam tip: calculate a percentage share by multiplying the total profit by the percentage and dividing by 100.

Correct answer: A. Share of general reserve

General reserve represents accumulated past profits. On a partner’s death, the deceased partner’s share of the reserve, calculated in the old profit-sharing ratio, is credited to the deceased partner’s capital account. In contrast, accumulated loss and revaluation loss are debited to the partner’s account, while an outstanding expense is a liability of the firm. Exam tip: a partner’s share of accumulated profits or reserves is generally credited, whereas a share of losses is debited.

Correct answer: A. Deceased partner’s executor’s loan account

The adjusted amount due to the deceased partner, including amounts related to capital, profit and goodwill, becomes payable to the partner’s executor. If it is not paid immediately, the amount is transferred to the deceased partner’s executor’s loan account. The capital account is closed after the necessary adjustments, so option B is not correct. Exam tip: When payment is deferred, remember that the amount is transferred to the executor’s loan account.

Correct answer: A. No, only the share of profits up to the date of death is included

The deceased partner’s account generally includes the partner’s proportionate share of profits earned by the firm up to the date of death, along with other relevant adjustments such as goodwill and revaluation profit or loss. A share of ordinary future profits earned after death is not added to that account. Therefore, option B is incorrect because it claims a share in all post-death profits. In an examination, distinguish carefully between profit up to the date of death and future profit after death.

Correct answer: A. 1/5

The total number of ratio parts is 2 + 2 + 1 = 5. C has 1 of those 5 parts, so C’s share is 1/5 of the total profit.

Correct answer: A. When the investments are revalued or settled and the risk of fluctuation no longer exists

The Investment Fluctuation Reserve is created to cover a possible loss in the value of investments. Once the investments have been revalued or settled and no further fluctuation risk remains, the balance of the reserve is distributed among the old partners in their old profit-sharing ratio. The deceased partner’s share is transferred to their capital or current account. Therefore, distribution is not automatic in every situation and is not restricted to the year-end. Exam tip: Adjust the actual gain or loss on investments first, and distribute only the remaining reserve.

Correct answer: A. ₹12,000

Estimated profit up to the date of death = Previous year’s annual profit × fraction of the year elapsed = ₹72,000 × 2/12 = ₹12,000. This calculation assumes that profits accrue evenly throughout the year. ₹24,000 represents four months’ profit, so it is not correct for two months. In the exam, divide the elapsed months by 12 before multiplying by the annual profit.

Correct answer: A. कानूनी प्रतिनिधि को देय राशि

The deceased partner’s capital account is adjusted for capital, goodwill, revaluation, accumulated profits or losses, and profit or loss up to the date of death. After these adjustments, its final balance generally represents the amount payable to the deceased partner’s legal representative. Option C refers only to profit up to the date of death, whereas the final balance includes several other adjustments. Exam tip: The final balance is transferred to the deceased partner’s executor or legal representative account.

Correct answer: A. ₹30,000

The deceased partner’s share of goodwill is calculated as: Total goodwill × the partner’s profit-sharing fraction = ₹2,40,000 × 1/8 = ₹30,000. Therefore, option A is correct. The nearby distractor ₹20,000 does not result from correctly taking one-eighth of the goodwill. In an exam, multiply total goodwill by the deceased partner’s profit-sharing share.

Correct answer: A. Because it is the partner’s earned entitlement

Accumulated profits are undistributed profits earned in earlier years. Therefore, the deceased partner’s share is credited to their Capital Account in the old profit-sharing ratio and becomes part of the amount payable to the partner’s executor. It is not an external liability or an expense of the firm. Exam tip: Credit the deceased partner’s share of accumulated profits using the old profit-sharing ratio.

Correct answer: A. Revaluation loss

The amount due to a deceased partner generally includes the partner’s capital, share of goodwill, general reserve and profit up to the date of death. A revaluation loss is debited to the partner’s account and therefore reduces the amount payable. Hence, revaluation loss is correct. Exam tip: add profits and reserves, but deduct losses and drawings.