Question

A, B and C are partners. C expired on 18th December, 2019 and as per agreement surviving partners A and B directed the accountant to prepare financial statement as on 18th December, 2019 and accordingly the share of profits of C (deceased partner) was calculated as ₹ 12,00,000. Which account will be debited to transfer C's share of profit:

Options

• Profit and Loss Suspense Account

• Profit and Loss Appropriation Account

• Profit and Loss Account

• None of the above

Answer 1

Profit and Loss Suspense Account

Explanation:

The profit share of a deceased partner is calculated up to the date of death in an accounting year. Since final accounts are normally generated at the end of the financial year, the profit amount is estimated based on the previous year's profit or interim financial statements.

Profit/loss The dead partner's profit is sent to the Suspense Account because the total profit is unknown. The dead partner's legal heirs receive this money later.