A, B & C are partners sharing profits in the ratio of 3:2:1. C died on 1st July, 2023. On this date, final accounts were prepared to ascertain profits for the period. It resulted in a profit of ₹1,75,000 to the firm. To give effect to the above:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Profit and loss Appropriation A/c will be debited
The profit of ₹1,75,000 has already been worked out in the final accounts up to the date of death. It now has to be distributed among A, B and C in 3:2:1, and distribution of profit among partners is made through the Profit and Loss Appropriation Account:
Profit and Loss Appropriation A/c Dr. 1,75,000
To A’s Capital A/c 87,500
To B’s Capital A/c 58,333
To C’s Capital A/c 29,167
C’s share (1/6 of ₹1,75,000) becomes part of the amount due to his executors.
Why the other options are incorrect
Option (1) Profit and loss A/c will be debited — Incorrect. The Profit and Loss Account only works out the profit; its balance is transferred to the Appropriation Account, from where it is shared.
Option (3) Profit and loss A/c will be credited — Incorrect. Crediting it would add to the profit, not distribute it.
Option (4) Profit and loss Appropriation A/c will be credited — Incorrect. When profit is given to the partners, the Appropriation Account is debited and the partners’ capital accounts are credited.
NCERT (2026-27 edition): NCERT (2026-27 edition):
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