Financial Accounting · Death of Partner

Profit and Loss up to Date of Death of a Partner

Updated 10 October 2026 · Fact-checked

When a partner dies mid-year, the firm must credit the deceased with his share of profit from the last balance sheet date to the date of death. Estimate that profit on a time basis (pro rata by months or days) or a sales basis (in proportion to sales), then multiply by his profit share.

Understand Calculation of Profit and Loss up to Date of Death

A firm closes its books on a fixed date, usually 31 March. A partner may die on any day after that. The deceased is entitled to his share of profit for the part of the year he was alive. His legal representatives will claim it.

If the firm prepares actual accounts up to the date of death, take the profit from those accounts through the Profit and Loss Account. If accounts are not prepared, the profit up to the date of death must be estimated, and the Profit and Loss Suspense Account is used to record the estimated share.

There are two usual ways to estimate. The time basis assumes profit accrues evenly through the year. You take the profit of the year and apply the fraction of the year that has passed. The sales basis assumes profit moves with sales. You take the profit of the year and apply the ratio of sales up to the date of death to the sales of the full year.

Which profit do you use? Usually the question tells you. If it says the profit of the last completed year is to be used, take that figure. If it gives the profit of the whole year in which death occurs, use that figure. Read this carefully.

Once you know the firm's profit up to the date of death, multiply by the deceased's profit sharing ratio. When profit is estimated, the usual treatment is to credit his capital account and debit Profit and Loss Suspense Account. If the firm has a loss, the entry reverses. The suspense account is closed to the Profit and Loss Account at the year end.

The time basis is simple and is the default when the question gives no sales figures. The sales basis is used when sales are uneven, for example in a seasonal business, and the question gives sales data.

Key rules to remember

Time basis: Profit up to death = Profit of the year × (Months or days from last balance sheet date to death ÷ 12 months or 365 days); Use when profit is assumed to accrue evenly. Use months if the question gives dates in whole months.
Sales basis: Profit up to death = Profit of the year × (Sales from last balance sheet date to death ÷ Sales of the full year); Use when the question gives sales and says profit should follow sales.
Deceased partner's share: Share of profit = Profit up to death × Deceased partner's profit sharing ratio; Credit his capital account. When profit is estimated, debit Profit and Loss Suspense Account.
Journal entry for profit: Profit and Loss Suspense A/c Dr. to Deceased Partner's Capital A/c; Used when profit is estimated. For a loss, reverse the entry: Deceased Partner's Capital A/c Dr. to Profit and Loss Suspense A/c.
Sales up to death when only part sales are given: Sales up to death = Total sales of the year − Sales after the date of death; Or add monthly sales from the start of the year till the death.

How to solve Calculation of Profit and Loss up to Date of Death questions

Follow these steps for any question on profit up to the date of death.

1Note the last balance sheet date and the date of death. Count the period between them in months or days.
2Check whether actual accounts are prepared up to the date of death. If yes, take profit from them. If not, estimate it.
3Identify which profit figure is to be used: the previous year's profit, the current year's profit or an average. Take it exactly as the question states.
4Check the basis. If the question says time basis or gives no sales data, use time. If it gives sales and asks for sales basis, use sales.
5Compute the firm's profit up to the date of death using the correct formula.
6Multiply by the deceased partner's profit sharing ratio to get his share.
7Pass the entry: Profit and Loss Suspense A/c Dr. to Deceased Partner's Capital A/c. Reverse it for a loss.
8Show the working note clearly, then carry the amount into the deceased partner's capital account and the final amount due to the executors.

Quickest way: Fraction first, then ratio

When to use it: Use when the question gives one profit figure and a clear basis, and you need only the deceased's share.

Write the fraction of the year (for example 5/12) or the sales fraction.
Multiply the profit by that fraction.
Multiply the result by the deceased's share, for example 2/5.
Write one line of journal and move on.

Common mistakes in Calculation of Profit and Loss up to Date of Death

Using the wrong profit figure, such as the current year's when the question gives the previous year's profit.
Students pick the largest or latest number without reading the instruction.
Fix: Underline the phrase that tells you which year's profit to use before you start calculating.
Counting the months wrongly, for example 6 months for a 1 April to 30 June death.
Students count from the wrong start date or confuse the financial year with the calendar year.
Fix: Count from the day after the last balance sheet date to the date of death. For a 31 March year end and death on 30 June, it is 3 months.
Using the firm's profit as the deceased's share.
Students stop after finding profit up to death and forget to apply the ratio.
Fix: Always finish with the multiplication by the partner's sharing ratio before posting the entry.
Using sales basis with the full year's sales in the numerator.
The sales fraction is turned upside down or the wrong sales figure is picked.
Fix: Numerator is sales up to the date of death. Denominator is sales of the full year. The fraction must be less than 1.
Using the Profit and Loss Suspense Account when actual accounts up to the date of death are prepared, or debiting Profit and Loss Account when profit is only estimated.
Students do not check whether the profit is taken from actual accounts or is an estimate.
Fix: If accounts are prepared to the date of death, take the profit from them through the Profit and Loss Account. If profit is estimated, use the Suspense Account, which is closed to the Profit and Loss Account at year end.
Treating a loss as profit.
The sign is ignored when the firm shows a loss for the year.
Fix: If the base figure is a loss, debit the deceased's capital account and credit the suspense account.

Worked examples

Example 1

Anil, Bhavin and Chetan share profits in the ratio 3:2:1. The firm closes its books on 31 March each year. Chetan dies on 30 September 2026. The profit of the year ended 31 March 2026 was ₹4,80,000. Calculate Chetan's share of profit up to the date of death on a time basis, using the profit of the previous year, and pass the entry.

Show the solution

Period from 1 April 2026 to 30 September 2026 = 6 months.
Profit up to death = ₹4,80,000 × 6/12 = ₹2,40,000.
Chetan's share = 1/6 of ₹2,40,000 = ₹40,000.
Entry: Profit and Loss Suspense A/c Dr. ₹40,000 to Chetan's Capital A/c ₹40,000.

Answer: Chetan's share of profit up to the date of death is ₹40,000, credited to his capital account.

Example 2

Deepak, Eshan and Farhan share profits equally. Books close on 31 March. Farhan dies on 31 July 2026. Sales for the year ended 31 March 2026 were ₹30,00,000 and sales from 1 April to 31 July 2026 were ₹9,00,000. The firm's profit for the year ended 31 March 2026 was ₹3,60,000. Using the previous year's profit and the sales basis, with sales up to death of ₹9,00,000 against the previous year's full sales of ₹30,00,000, find Farhan's share.

Show the solution

Sales ratio = ₹9,00,000 ÷ ₹30,00,000 = 3/10.
Profit up to death = ₹3,60,000 × 3/10 = ₹1,08,000.
Farhan's share = 1/3 of ₹1,08,000 = ₹36,000.
Entry: Profit and Loss Suspense A/c Dr. ₹36,000 to Farhan's Capital A/c ₹36,000.

Answer: Farhan's share of profit up to the date of death is ₹36,000.

Exam tips

Write the basis (time or sales) and the profit year in the first line of your working note. This earns the method mark even if arithmetic slips.
Show the fraction of the year as a number, such as 6/12, before multiplying. Examiners give step marks for it.
Always give the journal entry with narration. Use the Profit and Loss Suspense Account when profit is estimated.
For MCQs, compute the firm's profit first, then the partner's share. Options often include the firm's profit as a trap.
Check whether the question asks for the share for the deceased only or the profit for the firm. Answer exactly what is asked.

Practice questions from Death of Partner

Calculation of Profit and Loss up to Date of Death: frequently asked questions

What is the difference between time basis and sales basis in death of a partner?

Time basis spreads the year's profit evenly over time and uses the fraction of the year elapsed. Sales basis links profit to sales and uses the ratio of sales up to death to the full year's sales. Use sales basis only when sales data is given.

Which profit do I use to calculate profit up to the date of death?

Use the figure the question specifies. It is often the previous year's profit, or the current year's profit if given. Read the instruction and do not pick a figure on your own.

Where is the profit up to the date of death recorded?

If actual accounts are prepared to the date of death, the profit comes from the Profit and Loss Account. If profit is estimated, it is debited to Profit and Loss Suspense Account and credited to the deceased partner's capital account. At year end the suspense account balance is transferred to the Profit and Loss Account.

What if the firm has a loss up to the date of death?

The deceased partner bears his share of the loss. Debit his capital account and credit the Profit and Loss Suspense Account.