In case of Death of a Partner Accounts are drawn up to settle the account of the deceased partner. All the adjustments are being made in the capital account of the deceased partner and then the balance of the capital account is transferred to his executor’s account.
The legal representative of the partner get the following amounts : –
- Amount standing to the credit of deceased partners capital account.
- Deceased partner’s share of profit upto his death.
- His share of increase in the value of goodwill of the firm.
- Interest on capital
The following amount is debited from the deceased partner’s capital account:
- Drawings, and interest on drawings, if any
- Losses on revaluation of assets and liabilities
- Share of undistributed losses
Death of a Partner Accounts – Ascertaining Profits in case of Death of a Partner
The deceased partner is eligible to his share of profit upto his date of death which is calculated under following methods:
- On Time Basis: Under this method, profit earned by the firm during the year of death is calculated proportionately for the period served by the deceased partner, and his share is allocated to him/her.
- On Turnover Basis: In this method, we consider the profit and total sales earned during the last year and the proportion thereof is applied to sales upto the death of the deceased partner.