If profit is earned uniformly throughout the year, which ratio is used to estimate the deceased partner’s share of profit up to the date of death?

Correct answer: Time ratio

When profit is assumed to accrue uniformly throughout the year, the annual profit is apportioned up to the date of death using the time ratio. For example, if death occurs after 3 months, the usual share of profit up to death is 3/12 of the annual profit. A sales ratio may be used when profits vary significantly with sales or seasonality. Exam tip: select the time ratio when the question states that profit accrues uniformly or is to be apportioned by time.