Riya, Tiya, Priya were partners in a firm sharing profit in a ratio of 4:3:2. The profit of the firm for the year ending March 31, 2020 was ₹3,60,000. Tiya died on June 30, 2020.
Which account will be debited and by how much on account of share or profit up to the date of death?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Profit and loss suspense A/c ₹30,000.
Old ratio 4:3:2
Profit of the firm ₹3,60,000
Based on last year profit, Profit upto her death=
= 3,60,000 x 3/9 x 3/12
= 3,60,000 x 1/3 x 1/4
= 1,20,000/4
= 30,000
Profit and loss suspense account is debited in case of death.
Following journal entry is passed for this-
Profit and loss suspense A/c Dr. ₹30,000.
To Tiya's Capital A/c ₹30,000.