How profit and loss suspense A/c is closed after transferring profit for the intervening period to deceased partner in case of death of partner?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- Transferring the profit & loss suspense A/c to Gaining Partners' Capital Account in their gaining ratio.
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.
Later Profit and Loss Suspense account is closed by transferring the account to Gaining Partners' Capital Account in their gaining ratio. The journal entry is:
Gaining Partners Capital A/c [In gaining ratio]
To Profit and Loss Suspense A/c
(P&L Suspense account transferred).