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CMA Intermediate · Financial Accounting · Death of Partner

On the death of a partner in a firm whose deed is silent on the matter, what is the amount legally due to the deceased partner's estate in respect of his interest in the firm?

The deceased partner's estate receives his full interest in the firm: capital plus his share of reserves, revaluation profit, goodwill and profit up to the date of death, less drawings. Paying only the capital balance would ignore accumulated profits and goodwill that he helped build up.

  1. AOnly his capital balance as shown in the last balance sheet
  2. BHis capital and share of reserves and revaluation profit, after adjusting goodwill and profit to date of death, less drawingsCorrect
  3. COnly his share of accumulated profits up to the last balance sheet
  4. DHis original capital contribution at the date of admission

Explanation

The estate of the deceased partner is entitled to the capital balance plus share of reserves/undistributed profits, share of revaluation profit and goodwill, interest on capital and profit up to the date of death, less drawings and interest on drawings. Limiting it to capital alone ignores the accumulated reserves and goodwill, so that option is wrong.

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