Settlement of Amount Payable to the Deceased Partner

(i) On Time Basis

\[\begin{aligned} & \text{Deceased Partner's Share of Profit} \\ & \text{} \\ & =\frac{\text{No.of Days or Months from the date of Last Balance Sheet till the date of Death}}{365\text{ Days or 12 Months}}\times{\text{Previous Year's Profit or Average Profit}}\times{\text{Profit Share of Deceased Partner}}
\end{aligned}\]

(ii) On the Basis of Turnover or Sales

\[\text{Deceased Partner's Share of Profit}=\begin{array}{ccc}\text{Sales till the date of death} \end{array}\times\begin{array}{cc}\text{Last Year's Profit Percentage}\end{array}\times\begin{array}{cc}\text{Profit Share of Deceased Partner }\end{array}\]

A. Payment or Settlement of Amount Payable to the Deceased Partner:

1. When Payment is Made in Lump Sum:

Deceased Partner’s Executor’s A/c      ...Dr.

       To Bank A/c

2. When Payment is Made in Instalments:

(i) When Interest is Due on Outstanding Balance:

Interest A/c                 ...Dr.

      To Deceased Partner’s Executor’s A/c

(ii) When Instalment is Paid:

Deceased Partner’s Executor’s A/c      ...Dr.

       To Bank A/c

B. Share of Profit of the Deceased Partner:

1. When Profit Share is Estimated:

(i) If Profit-Sharing Ratio Does Not Change:

Profit & Loss Suspense A/c         ...Dr.

      To Deceased Partner’s Capital A/c

(ii) If Profit-Sharing Ratio Changes:

Continuing (Gaining) Partners’ Capital/Current A/cs     Dr.   [In Gaining Ratio]

       To Deceased Partner’s Capital A/c

C. When Loss is Estimated:

1. If Profit-Sharing Ratio Does Not Change:

Deceased Partner’s Capital A/c        ...Dr.

      To Profit & Loss Suspense A/c

2. If Profit-Sharing Ratio Changes:

Deceased Partner’s Capital A/c        ...Dr.

       To Continuing (Gaining) Partners’ Capital/Current A/cs   [In Gaining Ratio]

D. When Profit or Loss is Determined (Based on Interim Financial Statements):

1. In Case of Profit:

Profit & Loss Appropriation A/c       ...Dr.

      To Partners’ Capital A/cs                [In their Profit-Sharing Ratio]

2. In Case of Loss:

Partners’ Capital A/cs         ...Dr.     [In their Profit-Sharing Ratio]

       To Profit & Loss Appropriation A/c