Why is the time ratio useful for calculating a deceased partner’s share of profit up to the date of death?

Correct answer: Because profit generally accrues over time

To estimate the profit earned up to the date of death in the current year, profit is apportioned in the ratio of the elapsed period to the full accounting period. This is based on the assumption that profit accrues over time. Changes in capital, stock, or bank balance are not the reason for using the time ratio. Exam tip: For the deceased partner’s profit share, form the time ratio using the period from the beginning of the year to the date of death against the complete profit period.