CMA Intermediate · Financial Accounting · Death of Partner

Ravi, Sunil and Tarun share profits in the ratio 3:2:1. Ravi dies on 30 September. His capital account is credited with his share of capital, reserves and goodwill, and debited with drawings and share of loss up to the date of death. After these adjustments the account shows a credit balance of Rs 1,80,000, which is to be paid to his executors later. What is the correct accounting step on the date of death?

The final balance of the deceased partner's capital account is transferred to his Executors' account, which is shown as a liability of the firm. This is done because the amount is now payable to his legal representatives and no longer forms part of the continuing partners' capital.

1. ATransfer Rs 1,80,000 from Ravi's capital account to Ravi's Executors' account, a liability of the firmCorrect
2. BLeave the balance in Ravi's capital account as part of the firm's capital until payment
3. CTransfer the balance to the Profit and Loss Appropriation account
4. DTransfer the balance equally to the capital accounts of Sunil and Tarun