On a partner’s death, what effect do the firm’s accumulated profits have on the deceased partner’s claim?

Correct answer: Added to the claim

On a partner’s death, accumulated profits, such as general reserve and the credit balance of the Profit and Loss Account, are distributed among the partners in their old profit-sharing ratio. The deceased partner’s share is credited to the deceased partner’s Capital or Current Account and therefore increases the amount payable to the estate. In contrast, accumulated losses are deducted. Exam tip: Add accumulated profits, deduct accumulated losses, and make the adjustment in the old profit-sharing ratio.