Where will the profit and loss suspense account be shown after the adjustment of the retiring partner's share of profit is done by the partnership firm?
Answer & explanation
Correct answer: option 1
Profit and loss suspense account is a temporary account prepared at the time of death of a partner in a partnership firm. The deceased partner is credited with his share of the approximated profit earned within the period when he/she was an active partner. On the death of the partner, his profit or loss share is credited or debited respectively to his/her capital account against P/L Suspense a/c. At the end of the accounting period, this a/c is transferred to P/l appropriation a/c or shown in balance sheet as an asset.