Sangeeta, Saroj, and Shanti are partners sharing profits in the ratio of 2:3:5. Sangeeta dies on 10 March 2021 and the remaining partners directed the accountant to prepare financial statements on 10 March 2021. Accordingly, Sangeeta's share of profit came out to ₹85000. Which account will be debited to transfer Sangeeta's share of profit?

Profit and loss suspense account

The correct answer is option 2- Profit and loss suspense account.

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.
Subsequently, the Profit and Loss Suspense Account is reconciled by transferring its balance to the Gaining Partners' Capital Accounts based on their gaining ratio.

FOR LOSS-
Debit Deceased Partner's Capital Account and credit Profit and Loss Suspense Account.