To estimate the deceased partner’s share of profit up to the date of death, which year’s profit is generally used as the basis?

Correct answer: 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.