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On death of a partner, his executor is paid the share of profits of the dying partner for the relevant period. This payment is recorded in Profit & Loss ………..Account
- a)Adjustment
- b)Appropriation
- c)Suspense
- d)Reserve
Correct answer is option 'C'. Can you explain this answer?
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On death of a partner, his executor is paid the share of profits of th...
Explanation:
Accounting Treatment:
- When a partner dies, his executor is entitled to receive the share of profits of the deceased partner for the relevant period.
- This payment is recorded in the Profit & Loss Account under the Suspense Account.
Suspense Account:
- The Suspense Account is used to temporarily record transactions that cannot be categorized into a specific account.
- In this case, the payment to the executor of the deceased partner's share of profits does not fit into the regular categories of Adjustment, Appropriation, or Reserve, so it is recorded in the Suspense Account.
Finalization of Accounts:
- The entry in the Suspense Account is a temporary measure until the final accounts are prepared and the distribution of profits is finalized.
- Once the final distribution is determined, the amount in the Suspense Account will be transferred to the appropriate account (such as Executor's Account or Partner's Capital Account).
Conclusion:
- In conclusion, the payment to the executor of a deceased partner's share of profits is recorded in the Profit & Loss Account under the Suspense Account until the final distribution is decided.
Accounting Treatment:
- When a partner dies, his executor is entitled to receive the share of profits of the deceased partner for the relevant period.
- This payment is recorded in the Profit & Loss Account under the Suspense Account.
Suspense Account:
- The Suspense Account is used to temporarily record transactions that cannot be categorized into a specific account.
- In this case, the payment to the executor of the deceased partner's share of profits does not fit into the regular categories of Adjustment, Appropriation, or Reserve, so it is recorded in the Suspense Account.
Finalization of Accounts:
- The entry in the Suspense Account is a temporary measure until the final accounts are prepared and the distribution of profits is finalized.
- Once the final distribution is determined, the amount in the Suspense Account will be transferred to the appropriate account (such as Executor's Account or Partner's Capital Account).
Conclusion:
- In conclusion, the payment to the executor of a deceased partner's share of profits is recorded in the Profit & Loss Account under the Suspense Account until the final distribution is decided.
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On death of a partner, his executor is paid the share of profits of the dying partner for the relevant period. This payment is recorded in Profit & Loss ………..Accounta)Adjustmentb)Appropriationc)Suspensed)ReserveCorrect answer is option 'C'. Can you explain this answer?
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