Deceased Partner’s Share

Correct answer: A. ₹1,00,000

Profit up to the date of death = Annual profit × fraction of the year elapsed = ₹3,00,000 × 4/12 = ₹1,00,000. Therefore, option A is correct. Option B represents the profit for only 3 months, not 4 months. Exam tip: divide the annual profit by 12 and multiply it by the number of months completed.

Correct answer: A. Proper determination and settlement of the amount due to the deceased partner’s legal representative

After adjusting the deceased partner’s capital and current accounts, goodwill, revaluation, and profit or loss up to the date of death, the amount payable to the legal representative is determined. Hence, the main objective is a proper and accurate settlement. Tax saving and increasing sales are not the direct purposes of this calculation. Exam tip: Include all adjustments applicable up to the date of death while determining the amount due.

Correct answer: A. Goodwill

Goodwill represents the monetary value of a business’s reputation, customer loyalty and ability to earn higher profits; therefore, it is an intangible asset. Cash, stock and furniture are tangible assets because they have a physical form. In partnership adjustments, remember that goodwill is considered when determining the deceased partner’s entitlement.

Correct answer: A. ₹20,000

The deceased partner is credited with his share of the reserve in the profit-sharing ratio. Therefore, amount = ₹80,000 × 25/100 = ₹20,000. The other options result from incorrect percentage calculations. Exam tip: To calculate a partner’s share in a reserve or accumulated profit, multiply the total amount by the partner’s profit-sharing percentage.

Correct answer: A. Loan Account

The deceased partner’s capital, profit or loss adjustments, and other dues are settled through the partner’s capital account. When the final amount due is paid immediately, no loan account is required for a later settlement. A bank or cash account may be used depending on the mode of payment. Exam tip: No loan account is opened for immediate payment; if payment is deferred, the amount is transferred to the deceased partner’s loan account.

Correct answer: A. When the actual profit for that period has not yet been determined

When a partner dies before the end of the accounting year, the actual profit earned up to the date of death is generally not yet available. Therefore, the deceased partner’s share is estimated using methods such as time proportion, past profits, or sales and is credited to the partner’s Capital or Current Account. A zero profit in the previous year or an increase in sales alone does not create this requirement. Exam tip: If death occurs during the year and accounts are not finalised, estimate profit up to the date of death.

Correct answer: A. ₹9,000

The deceased partner’s share of profit = Total profit × Profit-sharing ratio = ₹54,000 × 1/6 = ₹9,000. Therefore, option A is correct. ₹12,000 represents 2/9 of the total profit, not 1/6. Exam tip: Multiply the profit for the relevant period by the deceased partner’s profit-sharing ratio.

Correct answer: A. It shows the adjusted capital balance, which is a major component of the amount payable

The deceased partner’s capital account is adjusted for items such as revaluation profit or loss, accumulated profits or losses, reserves, goodwill, and profit or loss up to the date of death. Its adjusted balance therefore forms a major component of the amount payable to the deceased partner. However, the final amount may also include the current account and other adjustments, so the capital account alone does not always represent the complete amount payable. Exam tip: Record all adjustments in the capital account before determining the final settlement.

Correct answer: A. 5/12

An accounting year is generally taken as 12 months. Therefore, the time ratio for the 5 months up to the date of death is 5/12. The ratio 7/12 represents the remaining 7 months, while 1/5 and 5/10 do not represent the annual time proportion. In exams, count the months up to the date of death and divide them by 12.

Correct answer: A. He was a partner up to the date of death

Revaluation profit is considered to arise up to the date on which the partner dies. Therefore, the deceased partner is credited with his share of this profit according to the profit-sharing ratio applicable up to the date of death. A new partner is entitled only to profits arising after admission. Exam tip: Revaluation profit up to the date of death or retirement belongs to the old partners.

Correct answer: A. ₹20,000

The deceased partner's share of goodwill = Total goodwill of the firm × the deceased partner's share = ₹90,000 × \(\frac{2}{9}\) = ₹20,000. Therefore, option A is correct. Option C results from an incorrect multiplication of the fraction. In the exam, multiply the total goodwill by the partner's fractional share and simplify the result.

Correct answer: A. Credited to the capital account, increasing its balance

Accumulated profits, such as a general reserve or a credit balance in the Profit and Loss Account, are distributed among the partners in their profit-sharing ratio. The deceased partner’s share is credited to the partner’s capital account, increasing the amount payable to the deceased partner’s legal representative. In contrast, accumulated losses are debited and reduce the capital balance. Exam tip: accumulated profit or reserve is credited; accumulated loss is debited.

Correct answer: A. ₹80,000

The total amount payable = capital + additional profit due = ₹70,000 + ₹10,000 = ₹80,000. Therefore, option A is correct. Option B incorrectly considers only the capital and ignores the profit due. In the exam, add all amounts payable to the deceased partner’s estate.

Correct answer: A. They relate to the period after death

A deceased partner is entitled only to the proportionate share of profit earned up to the date of death. Sales made after that date belong to the subsequent accounting period, so the resulting profit is attributable to the continuing or reconstituted firm. Option B contains a partial truth—sales themselves are not profit—but timing is the decisive reason. Exam tip: restrict the profit calculation to the period ending on the date of death.

Correct answer: A. ₹18,000

The deceased partner’s share of profit = Total profit × Profit-sharing ratio = ₹48,000 × 3/8 = ₹18,000. Therefore, option A is correct. ₹12,000 represents one-fourth of the profit, not three-eighths. Exam tip: identify the total profit and the deceased partner’s fraction first, then multiply and divide accordingly.

Correct answer: A. Fair and accurate settlement

Proper accounting adjusts the deceased partner’s capital and current accounts for goodwill, revaluation of assets and liabilities, accumulated profits, and the partner’s share of profit up to the date of death. This ensures a fair settlement of the amount due to the deceased partner’s legal representative. Higher sales, lower tax liability, or higher stock is not an essential outcome of this accounting. Exam tip: Include every relevant adjustment up to the date of death while calculating the amount payable.

Correct answer: A. Future profit

The amount due to a deceased partner includes the partner’s capital, share in reserves, and share of goodwill. The partner’s share of profit earned up to the date of death is also added, but profit earned after death is not included in the amount due. In an examination, remember that profit is calculated only up to the date of death.

Correct answer: A. ₹1,80,000

Time-based profit = Annual profit × elapsed months/12 = ₹2,16,000 × 10/12 = ₹1,80,000. Therefore, option A is correct. Options B and D represent profits for approximately 8⅚ and 6⅔ months, while option C is higher than the profit for 10 months. In the examination, multiply the annual profit by the elapsed months divided by 12.

Correct answer: A. Up to the date of death

A deceased partner’s share of the current year’s profit is calculated only for the period up to the date of death because the partner ceases to be a partner after that date. The amount is usually estimated using the basis of past profits, sales, or time up to the date of death. Taking the profit for the entire accounting year would be incorrect. Exam tip: For profit up to death, always identify the period ending on the date of death.

Correct answer: A. ₹6,000

The deceased partner is credited with their share of the reserve according to the profit-sharing ratio. Calculation: ₹36,000 × 1/6 = ₹6,000. Therefore, ₹6,000 is credited to the deceased partner’s Capital Account.

Correct answer: A. The amount payable to the legal representative increases

The deceased partner’s share of goodwill is credited to his capital or current account. This increases the balance in that account and consequently increases the total amount payable to the legal representative. Option B is incorrect because goodwill is an additional entitlement, not a deduction. Exam tip: On a partner’s death, credit the deceased partner’s share of goodwill to his account.

Correct answer: A. Profit is earned over a period of time

Profit is earned throughout the accounting year. Therefore, when profit is assumed to accrue evenly, the profit up to the date of death is estimated by applying the relevant time ratio to the annual profit. Changes in capital, stock or debt are not the basis of the time ratio. Exam tip: Use the period before death in proportion to the total accounting period when allocating annual profit.

Correct answer: A. ₹10,000

The deceased partner’s share of profit = Total profit × Profit-sharing fraction = ₹90,000 × \(1/9\) = ₹10,000. The ₹9,000 option results from incorrectly using \(1/10\). In the exam, multiply the total profit by the partner’s profit-sharing fraction.

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

After a partner’s death, the amount payable to the deceased partner is determined by adjusting items such as the capital account, current account, accumulated profits and the deceased partner’s share of profit up to the date of death. The legal heir’s primary role is to receive this amount. The heir does not automatically become a partner or take charge of the firm, and auditing the accounts is not the heir’s compulsory role. Exam tip: distinguish the heir’s right to settlement from admission as a new partner.

Correct answer: A. ₹18,000

The deceased partner’s share of goodwill is calculated as ₹72,000 × 1/4 = ₹18,000. Therefore, ₹18,000 is adjusted through the deceased partner’s Capital or Current Account. The other amounts do not represent one-fourth of ₹72,000. Exam tip: Multiply the total goodwill by the partner’s profit-sharing fraction to find the partner’s share.