Why is the capital account important when calculating the amount payable to a deceased partner?

Correct answer: It shows the deceased partner’s adjusted capital balance

The capital account shows the deceased partner’s capital balance, which is included in the amount payable after necessary adjustments such as profit or loss, reserves, goodwill and profit up to the date of death. Thus, it is an important basis of the calculation, although the amount due is not limited to the capital balance alone. Sales, purchases and closing stock relate to business transactions or assets, not directly to the deceased partner’s capital. Exam tip: While calculating the amount due, check the capital balance along with adjustments for goodwill, reserves and profit or loss up to the date of death.