Skip to content

CMA Intermediate · Financial Accounting · Death of Partner

A, B and C share profits equally. C dies on 30 September 2026, and the firm's books close on 31 March each year. Which of the following is the usual treatment of C's share of profit for the period 1 April to 30 September 2026 when the deceased partner's share is to be found on a time basis?

The profit up to the date of death is estimated on a time basis, and the deceased partner's share is credited to the capital account via a Profit and Loss Suspense Account. This is because the deceased partner is entitled to profit earned until death.

  1. AProfit is calculated up to the date of death on a time-apportioned basis of the last year's profit, and C's share is credited to C's capital accountCorrect
  2. BC's share is ignored because a dead partner cannot earn profit
  3. CC's share is credited only after the next balance sheet date and not shown in the executor's account
  4. DThe whole profit of the year is credited to C's account

Explanation

When a partner dies mid-year and no audited profit up to death exists, the profit to the date of death is estimated by time apportionment of previous or current year profit. The deceased's share is credited to the capital account through the Profit and Loss Suspense Account. Ignoring it or crediting the whole year profit is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Death of Partner shows your real accuracy, how long you take and where you lose marks.

Practise Death of PartnerFree diagnostic mock

More Death of Partner questions