PREPARED BY: SMT.SHAKUNTALA PUJAR,

PGT COMMERCE, JNV, KOPPAL.

DEATH OF A PARTNER

• MEANING:The partnership come to an end immediately, whenever a partner dies although the firm may continue with the remaining partners.
• The diseased partners executer is entitled to get his share in the firm as per the provisions of a partnership agreement. His share is calculated in the same way as in the case of a retiring partner.

������Difference between the retirement and death of a partner�

• The retirement of a partner may be planned whereas the death of a partner may occur at any time.
• In case of retirement the payment of the amount due is made to the retiring partner but in case of death it is to be made to the legal representative of a deceased partner.

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Deceased Partners Capital Account�

�Settlement of Deceased partners executors account

• When payment is made in full in one settlement.

Deceased partner Executors account

To Bank account

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• When interest is due

Interest Account

To Deceased Partners Executors Account

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• When installment is paid

Deceased Partners Executors Account

To bank account

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C’s Executors Account�

Ex: A B C is died

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Treatment of certain issues�

• TREATMENT OF GOODWILL :- It is same as in the case of retirement of a partner.

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• 2. Share of profit or loss, interest on Capital, Interest on drawings from the date of the last Balance Sheet to the date of his death.

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��Calculation of deceased partner share of profit�

• TWO METHODS ARE AS FOLLOWS:
• On the basis of time
• On the basis of turnover or sales

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1) On the Basis of Time:

a) On the basis of last years profit

Problem: B dies on 31.03.2018 in partnership of A B & C

Sharing in the Ratio of 3:2:1:

The Profit for the year ending on 31.12.2017 was Rs.24000. Calculate B’s share of profit

Solution: Total profit for the year 2017 = 24000

Period between last final accounts to

The date of death = Jan 1 to March 31, 2018= 3months

. B’s share of profit = 24000 x 3/12 x 2/6 or 1/3

=2000

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ON THE BASIS OF AVERAGE PROFIT OF CERTAIN YEARS

• Problem: A B & C are partners sharing profits in the Ratio 5:3:2. They agree to calculate deceased partners share of profit for his life during the current year on the basis of last 3 years profit. C dies on 30^th April, 2018. The profits for the year 2015, 2016 & 2017 are Rs.20000, 25000 and 27000 respectively. Calculate C’s share of profit.
• Solution:
• Total profit of the last years = 20000+25000+27000 =Rs.72000
• Average profit = 72000/3=24000
• Period between last final account to the date of death = January 01 to April 30, 2018 = 4 months
• C’s share of profit = 24,000x 4/12x2/10 or 1/5= 1600

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ON THE BASIS OF SALES/TURN OVER �

• Problem: X Y & Z are sharing profits in the ratio of 2:2:1. Y died on 30^th June 2018. Accounts are closed on 31^st March. Sales for the year ended 31.03.2018 amounted to Rs.600000. Sales of Rs.200000 amounted between the period from 1^st April 2018 to 30^th June 2018.The profits for the year ended 31.03.2018 amounted to Rs.60000. Calculate deceased partners share in the profits of the firm.
• Solution:

Percentage of the profit to the sales for the year ended 31^st March, 2018 = 60000/600000 x 100=10%

Profit up to the death = 10/100 x 200000 = 20000

Y’s share of profit will be = 20000 x 2/5 = 8000

OR

If sales 600000 - 60000 (profit)

200000 - ?

=200000x60000 = 20000 ,

600000 Y’s share of profit =20000x2/5=8000

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• Problem: Ajay, Bhavana & Shreya were partners. Sharing profits in the Ratio of 2:2:1. On July 1^st, 2017 Shreya died. The books of Accounts are closed on March 31^st every year. Sales for the year 2016-17 amounted to Rs.500000 and that from 1^st April 2017 to 30^th June 2017 were Rs.140000. The rate of profit during the past 3 years had been10% on sales. Since Shreya’s legal representative was her only son, who is specially abled, it was decided that the profit for the purpose of settling Shreya’s account is to be calculated as 20% on sales.
• Calculate Shreya’s share of profit till the date of her death and pass necessary journal entries for the same. Also state any two values highlighted in the above case.

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• Solution: Sales from 1^st April to 30^th June 2017 =140000
• Total profit on sales from 01^st April to 30^th June 2017
• =140000X20/100=28000
• Shreya’s share of profit till the date of death = 28000x1/5=Rs.5600

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Value: Concern towards the specially abled students

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• P Q R were partners sharing profits in the ratio of 5:3:2 are died on 1^st August, 2015. Amount due to R’s executor after all adjustments was Rs.90300. The executor was paid Rs.10300 in cash immediately and the balance in two equal annual installments with interest at 6% per annum starting from 31^st March, 2017. Accounts are closed on 31^st March each year. Prepare R’s Executors Account till he his finally paid. 6 M

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Dr

Cr

R’S EXECUTORS ACCOUNT