Why is it considered fair to give a deceased partner a share of the profit earned up to the date of death?

Correct answer: Because it recognises the partner’s right to the profit earned during the period up to death

Since the partner contributed to the business up to the date of death, the partner is entitled to the proportionate share of profit earned during that period, even though the annual accounts may be prepared later. This amount is generally estimated using the previous year’s profit ratio, sales, or another agreed basis and is credited to the deceased partner’s capital account or executor’s account. Option B is incorrect because the entire year’s profit is not automatically divided equally. Exam tip: Calculate the profit share only for the period from the beginning of the accounting year up to the date of death.