Question

A, B and C were partners sharing profits and losses in the ratio of 2 : 2 : 1. C died on 1st July, 2023, on which date the capitals of A, B and C after all necessary adjustments stood at ₹ 74,000, ₹ 63,750 and 42,250, respectively. A and B continued to carry on the business for six months without settling the accounts of C. During the period of six months from 1-7-2023, a profit of ₹ 20,500 is earned using the firm’s property. State which of the two options available under Section 37 of the Indian Partnership Act, 1932, should be exercised by executors of C and why?

Answer 1

(i) Share in the subsequent profits attributable to using his balance.

= `(₹ 42,250 xx 20,500)/(₹1,80,000)`

= ₹ 4,812

(ii) Interest @ 6% p.a. on the use of his balance = `₹ 42,250 × 6/12 × 6/100`

= ₹ 1,267.50

C should exercise option (i) since the amount payable to him under this option is more than the amount payable to him under option (ii).