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A partner dies four months after the beginning of the financial year. If the firm’s estimated annual profit is ₹1,50,000 and profit is earned uniformly throughout the year, what will be the profit up to the date of death?

Answer and explanation

Correct answer: ₹50,000

Profit up to the date of death = Annual profit × proportion of the year elapsed = ₹1,50,000 × 4/12 = ₹50,000. Hence, option A is correct. Option B results from using an incorrect time ratio, whereas annual profit must be apportioned over 12 months. In the examination, multiply the annual profit by the number of elapsed months divided by 12.

Related tags

Partnership AccountsRetirement Or DeathDeceased PartnerProfit AppropriationTime RatioAccounting CalculationDeceased Partner’s ShareDeceased Partner S Share

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