Question

Ram, Manu and Hari were partners in a firm. Hari died on 30th June, 2025. His share of profit from the closure of the last accounting year till the date of death was to be calculated on the basis of the average of three completed financial years of profits before death. Profits for the years ended 31st March, 2023, 2024 and 2025 were 1,10,000; 1,20,000 and 1,30,000 respectively.

Calculate Hari’s share of profit till the date of his death and pass the necessary journal entry for the same.

Answer 1

Since the profit-sharing ratio between Ram, Manu, and Hari is not specified in the question, it is legally assumed to be equal (1 : 1 : 1) under the Indian Partnership Act, 1932.

Hari’s Share = `1/3`

Average Profit:

Average Profit = `"Profits for the 3 years"/3`

= `(1,10,000 + 1,20,000 + 1,30,000)/3`

= `(3,60,000)/3`

= 1,20,000

The time from the last balance sheet closing (31st March, 2025) to the date of death (30th June, 2025) is exactly 3 months.

Firm’s 3 Months Profit = `1,20,000 xx 3/12`

= ₹ 30,000

Hari’s Share of Profit = `30,000 xx 1/3`

= 10,000

Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2025 June 30	Profit & Loss Suspense A/c   ...Dr.		10,000	-
	To Hari’s Capital A/c		-	10,000
	(Being Hari’s share of estimated profit up to his date of death credited to his capital account based on 3 years’ average profit)