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CMA Intermediate · Financial Accounting · Death of Partner

After the death of a partner, the amount due to the deceased's executor is not paid immediately but is to be paid in instalments with interest. How should the outstanding balance appear in the firm's balance sheet?

It is shown as a liability, typically Executor's Loan or Amount Due to Executors, on the liabilities side. The deceased is no longer a partner, so the balance is an amount owed by the firm and carries interest until settled.

  1. AAs a liability under the heading Executor's Loan or Amount Due to ExecutorsCorrect
  2. BDeducted from the capital of the surviving partners
  3. CShown as capital of the deceased partner
  4. DNot shown, because the partner has died

Explanation

The deceased's account balance is transferred to the executor's account, and as an unpaid amount it is a liability of the firm, shown on the liabilities side. It is no longer capital because the person is not a partner. Showing it in survivors' capital or leaving it out would misstate the position.

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