Share of loss of deceased partner, calculated on the basis of previous years profit is:
Answer & explanation
Correct answer: option 2
The correct answer is option 2- Debited to his capital account.
Share of loss of deceased partner, calculated on the basis of previous years profit is debited to his capital account.
To account for the deceased partner's share of profits and loss during the interim period in the company's financial records, the following journal entry is recorded:
FOR PROFIT-
Debit Profit and Loss Suspense Account and Credit Deceased Partner's Capital Account.
Subsequently, the Profit and Loss Suspense Account is reconciled by transferring its balance to the Gaining Partners' Capital Accounts based on their gaining ratio.
FOR LOSS-
Debit Deceased Partner's Capital Account and credit Profit and Loss Suspense Account.