What is the significance of the period elapsed up to the date of death when calculating a deceased partner’s share of profit?

Correct answer: To determine the estimated profit for the period elapsed up to death

When a partner dies during an accounting year, the deceased partner is entitled to a share of the profit earned up to the date of death. Therefore, the previous or estimated annual profit is apportioned according to the elapsed period, such as months divided by 12, unless the partnership agreement provides another basis. Time does not determine the profit-sharing ratio or directly value goodwill. Exam tip: identify the annual profit basis first, then apply the fraction representing the period up to death.