In case of Death of a Partner, Profit till death of deceased partner is debited to which account?a)Revaluation Accountb)Profit and Loss Suspense Accountc)Deceased Partner’s Capital Accountd)Deceased Partner’s Current AccountCorrect answer is option 'B'. Can you explain this answer?

Question

In case of Death of a Partner, Profit till death of deceased partner is debited to which account?a)Revaluation Accountb)Profit and Loss Suspense Accountc)Deceased Partner&rsquo;s Capital Accountd)Deceased Partner&rsquo;s Current AccountCorrect answer is option 'B'. Can you explain this answer?

Answer

Profit and Loss Suspense Account
In case of the death of a partner, the profit till the death of the deceased partner is debited to the Profit and Loss Suspense Account. This is done to ensure that the profit or loss attributable to the deceased partner is properly accounted for until the partnership is settled.
- Reason for Debiting to Profit and Loss Suspense Account:
When a partner dies, the partnership is usually dissolved or reconstituted. Until the final accounts are prepared and the deceased partner's share is settled, the profit or loss up to the date of death needs to be recorded in a separate Suspense Account.
- Temporary Holding Account:
The Profit and Loss Suspense Account acts as a temporary holding account where the profit or loss attributable to the deceased partner is recorded. This allows for the accurate calculation and distribution of the deceased partner's share in the final settlement.
- Final Settlement:
Once the final accounts are prepared, the profit or loss in the Profit and Loss Suspense Account will be transferred to the respective partners' Capital Accounts, including the deceased partner's Capital Account, based on their profit-sharing ratio.
- Importance of Proper Accounting:
Debiting the Profit till death of the deceased partner to the Profit and Loss Suspense Account ensures that the financial statements reflect the true financial position of the partnership until the deceased partner's share is settled.
In conclusion, debiting the Profit till death of the deceased partner to the Profit and Loss Suspense Account is a standard accounting practice in partnerships to accurately account for the deceased partner's share in the partnership until the final settlement is made.

Answer

Profit and loss suspense account is opened for profit till death.

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