Certain sequence is followed at the time of death of a partner and se…

Certain sequence is followed at the time of death of a partner and settlement of his account. Arrange them in proper order:

A. Ascertain his/ her adjusted capital, after all adjustments.
B. Opening balance of his/ her capital account.
C. Transfer adjusted amount payable to his /her legal executors.
D. Amount paid to legal executors.

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → B, A, C, D

The settlement starts from what the deceased partner’s capital account shows and ends with the cash that leaves the firm. Each step needs the result of the one before it.

(B) Opening balance of his/ her capital account. — first, because every claim is worked out from this balance.

(A) Ascertain his/ her adjusted capital, after all adjustments. — next, his share of goodwill, reserves, revaluation gain or loss, profit or loss up to the date of death, interest and drawings are added or deducted. The amount due is not known before this.

(C) Transfer adjusted amount payable to his /her legal executors. — then the amount due is moved to the executors’ account, which closes his capital account.

(D) Amount paid to legal executors. — last, the executors are paid in one sum or in instalments, as the deed provides.

NCERT (2026-27 edition):
Ascertaining the Amount Due to Retiring/Deceased Partner – “The sum due to the retiring partner (in case of retirement) and to the legal representatives/ executors (in case of death) includes: (i) credit balance of his capital account; (ii) credit balance of his current account (if any); (iii) his share of goodwill; (iv) his share of accumulated profits (reserves); (v) his share in the gain of revaluation of assets and liabilities; (vi) his share of profits up to the date of retirement/death; (vii) interest on his capital, if involved, up to the date of retirement/death; and (viii) salary/commission, if any, due to him up to the date of retirement/death.”

NCERT (2026-27 edition):
Disposal of Amount Due to Retiring Partner – “… It may noted that the accounting treatment for disposal of amount due to retiring partner and deceased partner is similar with a difference that in case of death of a partner, the amount credited to him/her is transferred to his Executors’ Account and the payment has to be made to him/her. This shall be taken up later in this chapter.”