Accountancy Part AReconstitution of Partnership Firm: Retirement and Death

Identify the basis on which share of Profit or Loss of deceased partn…

Identify the basis on which share of Profit or Loss of deceased partner is calculated from the date of last balance sheet to the date of death of that partner.

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Either Time Basis or Sales Basis

A partner may die in the middle of the year. Closing the books on that date is cumbersome, so his share of profit up to the date of death is estimated:

• Time basis – last year’s (or average) profit for the months elapsed, or

• Sales basis – last year’s profit-to-sales rate applied to sales up to the date of death.

NCERT (2026-27 edition):
Death of a Partner – “… Hence, in case of a partner, his claim shall also include his share of profit or loss, interest on capital, interest on drawings (if any) from the date of the last Balance Sheet to the date of his death of these, the main problem relates to the calculation of profit for the intervening period (i.e., the period from date of the last balance sheet and the date of the partner’s death. Since, it is considered cumbersome to close the books and prepare final account, for the period, the deceased partner’s share of profit may be calculated on the basis of last year’s profit (or average of past few years) or on the basis of sales.”