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Financial Accounting · Death of Partner

Deceased Partner's Capital Account and Executor's Account

Updated 10 October 2026 · Fact-checked

The deceased partner's capital account collects everything the firm owes the partner up to the date of death: capital, reserves, goodwill share, profit, interest, less drawings and losses. The final balance moves to the executor's account, which is then paid at once or in instalments with interest.

Understand Deceased Partner's Capital Account and Executor's Account

When a partner dies, the firm must settle what it owes him. His capital account is the tool. You credit it with all amounts due to him and debit it with all amounts he owes the firm. The net credit balance is the sum payable to his legal representatives, called the executors.

Credits usually include opening capital, share of reserves and accumulated profits, share of goodwill, share of revaluation profit, interest on capital, salary or commission due, share of profit up to the date of death, and his share of the joint life policy proceeds (if the question says so). Debits usually include drawings, interest on drawings, share of revaluation loss, share of accumulated losses, and his share of loss up to the date of death.

Once the balance is known, you transfer it to a new account: the executor's account (also called the executor's loan account). Entry: Deceased Partner's Capital A/c Dr. To Executor's A/c. After this, the amount is a liability of the firm. It is no longer capital.

Payment can be in one lump sum or in instalments. If paid in instalments, the unpaid balance normally carries interest at the rate agreed with the executors or stated in the question. Follow the question.

Separately, Section 37 of the Indian Partnership Act, 1932 applies where the firm continues the business without settling the deceased partner's accounts. In that case the executors may claim, at their option, either interest at 6% p.a. on the deceased partner's share, or the share of profit attributable to the use of that share of the firm's assets. It is not a general rule for instalment interest. Interest on instalments is charged on the opening balance of each period, so it falls as the balance is repaid.

The executor's account is therefore a running account: opening balance, interest added, instalment paid, closing balance. Only the interest is a charge to the firm's Profit and Loss Account.

Key rules to remember

Amount due to deceased partner
Capital + Reserves share + Goodwill share + Revaluation profit share + Interest on capital + Salary due + Profit up to death + JLP share − Drawings − Interest on drawings − Losses share
Use only the items the question gives. Treat each as credit or debit as shown.
Transfer entry
Deceased Partner's Capital A/c Dr. To Executor's A/c
Passed for the final credit balance after all adjustments.
Interest on instalment balance
Interest = Outstanding balance × Rate ÷ 100 × Time (in years)
Use the balance outstanding at the start of that period. Half-yearly period means time = 1/2.
Closing balance of executor's account
Opening balance + Interest − Instalment paid
Instalment paid may be principal alone or principal plus interest; read the question.
Interest on drawings up to death
Drawings × Rate ÷ 100 × Months ÷ 12
Months are from the date of withdrawal to the date of death, not to year end, unless stated.

How to solve Deceased Partner's Capital Account and Executor's Account questions

Use the same layout for any question. It keeps every adjustment visible and earns step marks even if one figure is wrong.

  1. 1Read the date of death and the settlement terms: lump sum, instalments, interest rate, and who bears goodwill or policy adjustments.
  2. 2Draw the deceased partner's capital account with two sides. Enter opening capital on the credit side.
  3. 3Add credit items: share of reserves, goodwill, revaluation profit, interest on capital up to death, salary due, profit up to death, JLP share.
  4. 4Add debit items: drawings, interest on drawings, revaluation loss share, accumulated loss share, loss up to death. Show workings below the account.
  5. 5Balance the account. The balancing figure on the debit side is the amount transferred to the executor's account.
  6. 6Pass the transfer entry. Pay any lump sum immediately and record the payment through the bank account.
  7. 7If instalments apply, build the executor's account in columns: date, opening balance, interest, instalment, closing balance. Calculate interest on the opening balance each period.
  8. 8Show the executor's account in the balance sheet under liabilities, with the closing balance after the last payment.

Quickest way: Four-line capital account shortcut

When to use it: Use it in MCQs and for the first half of long problems when you only need the final payable amount.

  1. Start with the capital balance. Add everything the partner gains: reserve share, goodwill share, revaluation gain, profit till death, interest on capital.
  2. Subtract everything he loses: drawings, interest on drawings, loss share.
  3. Check the sign of each item before adding. If goodwill is not raised in the books, the deceased is credited and the surviving partners' capital accounts are debited in their gaining ratio. If goodwill is raised, the Goodwill account is debited and all partners' capitals, including the deceased's, are credited in the old ratio.
  4. For instalments, write one line per period: opening balance × rate × time, then deduct the instalment. Repeat until the balance is nil.

Common mistakes in Deceased Partner's Capital Account and Executor's Account

  • Taking profit for the full year instead of up to the date of death

    Students start from the year-end profit and forget the death occurred earlier.

    Fix: Calculate time-based profit using the method in the question: sales-based, or time-based on the previous or current year's profit. Apply it only to the period up to death.

  • Charging interest on drawings to year end

    Habit from normal partnership accounts where the period ends on 31 March.

    Fix: For the deceased partner, stop interest on drawings and on capital at the date of death.

  • Calculating instalment interest on the original amount each time

    Students copy the first interest figure into every period.

    Fix: Interest is always on the balance outstanding at the start of the period. Rebuild the balance after each instalment.

  • Leaving the balance in the capital account after the transfer

    Students forget that the account must close.

    Fix: Write the transfer entry and show the capital account balance as nil after it. The amount now appears only under the executor's account.

  • Treating interest on the executor's balance as part of capital

    It looks like a partner's account because the name is similar.

    Fix: Interest on the executor's account is a finance charge. Debit it to Profit and Loss Account after death and credit the executor's account.

  • Giving goodwill share to the deceased but also debiting it to the firm

    Students are unsure who pays for goodwill.

    Fix: If goodwill is not raised in the books, credit the deceased's capital account and debit the surviving partners' capital accounts in their gaining ratio. If goodwill is raised, debit Goodwill account and credit all partners' capital accounts in the old ratio; the Goodwill account may be written off later in the new ratio.

Worked examples

Example 1

Anil, Bimal and Chetan share profits in the ratio 3:2:1. On 30 September 2026 Chetan died. His capital on 1 April 2026 was ₹2,00,000 and his drawings up to the date of death were ₹30,000. His share of reserve is ₹20,000. Interest on capital is 10% p.a. Interest on drawings is ₹600. His share of goodwill is ₹40,000, to be adjusted without raising goodwill in the books. Anil and Bimal continue and take over Chetan's share in their old ratio, so their gaining ratio is 3:2. Profit up to death is ₹1,20,000. Prepare Chetan's capital account and show the amount transferred to executor's account.

Show the solution
  1. Interest on capital: ₹2,00,000 × 10% × 6/12 = ₹10,000.
  2. Chetan's share of profit up to death: ₹1,20,000 × 1/6 = ₹20,000.
  3. Goodwill: it is not raised, so Anil and Bimal pay for it in the gaining ratio 3:2. Anil's Capital A/c Dr. ₹24,000 (₹40,000 × 3/5); Bimal's Capital A/c Dr. ₹16,000 (₹40,000 × 2/5); To Chetan's Capital A/c ₹40,000.
  4. Credit side: Capital ₹2,00,000 + Reserve ₹20,000 + Interest ₹10,000 + Profit share ₹20,000 + Goodwill ₹40,000 = ₹2,90,000.
  5. Debit side: Drawings ₹30,000 + Interest on drawings ₹600 = ₹30,600.
  6. Balance payable = ₹2,90,000 − ₹30,600 = ₹2,59,400.
  7. Entry: Chetan's Capital A/c Dr. ₹2,59,400 To Chetan's Executor's A/c ₹2,59,400.

Answer: Amount transferred to Chetan's executor's account = ₹2,59,400. The ₹40,000 goodwill is debited to Anil (₹24,000) and Bimal (₹16,000) capital accounts.

Example 2

On 1 April 2026 the executor's account of a deceased partner showed ₹2,40,000. It is payable in two equal annual principal instalments on 31 March 2027 and 31 March 2028. Interest at 10% p.a. is payable with each instalment on the balance at the start of each year. Prepare the executor's account.

Show the solution
  1. Year 1 opening balance ₹2,40,000.
  2. Interest for year 1: ₹2,40,000 × 10% = ₹24,000.
  3. Payment on 31 March 2027: principal ₹1,20,000 + interest ₹24,000 = ₹1,44,000.
  4. Closing balance 31 March 2027: ₹2,40,000 + ₹24,000 − ₹1,44,000 = ₹1,20,000.
  5. Year 2 interest: ₹1,20,000 × 10% = ₹12,000.
  6. Payment on 31 March 2028: principal ₹1,20,000 + interest ₹12,000 = ₹1,32,000.
  7. Closing balance 31 March 2028: ₹1,20,000 + ₹12,000 − ₹1,32,000 = nil.

Answer: Total payments are ₹1,44,000 and ₹1,32,000. Total interest charged to Profit and Loss is ₹24,000 + ₹12,000 = ₹36,000. The account closes at nil on 31 March 2028.

Exam tips

  • Write the date of death clearly at the top of the capital account. Many step marks depend on the period.
  • Show workings for interest, profit share and goodwill separately. Examiners award marks for method even if the final figure is wrong.
  • In MCQs, check whether the question says interest is payable on the outstanding balance or on the original amount.
  • Draw the executor's account as a table with opening balance, interest, payment and closing balance. It is faster than a ledger format.
  • Check the balance sheet liability: if the executor's account is partly paid, show only the closing balance.

Practice questions from Death of Partner

Deceased Partner's Capital Account and Executor's Account: frequently asked questions

What is the executor's account in partnership accounts?

It is a liability account that holds the amount due to the deceased partner's legal representatives after his capital account is settled. You credit it with the transferred balance and any interest, and debit it with payments.

Does interest on the executor's account go to the Profit and Loss Account?

Yes, interest on the unpaid balance after death is a finance charge to the firm. Debit Profit and Loss Account (or Interest A/c) and credit the executor's account.

How is the amount due to the deceased partner calculated?

Start with his capital. Add reserves, goodwill, revaluation profit, interest on capital and profit up to death. Deduct drawings, interest on drawings and any losses. The net credit balance is the amount due.

Can the executor be paid in instalments?

Yes, if the partnership deed or an agreement with the executors allows it. Interest is usually added on the unpaid balance at the agreed rate. Read the question for the rate and instalment dates.