Death of a Partner: Profit Till Date of Death

Death of a partner questions become much easier when you understand one small idea:

The partner was part of the firm only up to the date of death. So the deceased partner should receive a share of profit only for that period, not for the full accounting year.

This is why many questions ask you to calculate profit from the date of the last balance sheet up to the date of death.

The calculation is not difficult. The confusion usually comes from choosing the correct basis, counting the period correctly, and passing the right journal entry.

Once you keep this line clear, the formulas start making sense.

Why Profit Till Date of Death Is Calculated

Most firms prepare final accounts at the end of the financial year. But a partner may die during the year.

For example, suppose a firm closes its books on 31 March every year. One partner dies on 30 June. The firm may not prepare complete final accounts on 30 June, but the deceased partner still has a right to profit earned during April, May, and June.

So the firm estimates that profit and credits the deceased partner’s capital account.

This amount then becomes part of the total claim payable to the deceased partner’s executor or legal representative.

What the Question Usually Gives You

A question may give any one of these bases:

Basis given in the question	Meaning
Previous year’s profit	Use last year’s profit and take time proportion
Average profit of past years	First calculate average profit, then take time proportion
Sales up to date of death	Use the profit rate on sales, then take the deceased partner’s share

The partnership deed or question decides the basis. Your job is not to invent a method. Your job is to read the basis and apply it carefully.

Method 1: Time Basis Using Previous Year’s Profit

This is the most common method.

Here, we assume that profit is earned evenly throughout the year. Then we take profit only for the period up to the date of death.

The formula is:

Deceased partner's share of profit =
Previous year's profit x Time from last balance sheet date to date of death x Deceased partner's share

If the time is counted in months:

Previous year's profit x Months up to death / 12 x Deceased partner's share

If the time is counted in days:

Previous year's profit x Days up to death / 365 x Deceased partner's share

Use months when the question gives clean months. Use days when the date requires exact counting or the question clearly expects it.

Example: Previous Year’s Profit Basis

A, B, and C are partners sharing profits in the ratio 3:2:1. The firm closes its books on 31 March. C died on 30 June. The profit for the previous year was Rs. 1,20,000.

Calculate C’s share of profit till the date of death.

The period from 1 April to 30 June is 3 months.

C’s share in the profit sharing ratio is 1/6.

C's share = Rs. 1,20,000 x 3/12 x 1/6
C's share = Rs. 5,000

So Rs. 5,000 will be credited to C’s Capital Account.

Particular	Amount
Previous year’s profit	Rs. 1,20,000
Period up to death	3 months out of 12
Profit for 3 months	Rs. 30,000
C’s share	1/6
C’s share of profit till death	Rs. 5,000

This is the simplest form of the calculation.

Method 2: Time Basis Using Average Profit

Sometimes the question says that the deceased partner’s share should be calculated on the basis of average profit of the last few years.

In that case, first calculate average annual profit.

Average profit = Total profit of given years / Number of years

Then apply the same time basis:

Deceased partner's share =
Average profit x Time up to death / 12 or 365 x Deceased partner's share

Average profit is used because one year’s profit may be unusually high or low. An average gives a more balanced estimate.

Example: Average Profit Basis

A, B, and C share profits in the ratio 3:2:1. C died on 30 June. The firm closes books on 31 March. The profits of the last three years were:

Year	Profit
Year 1	Rs. 90,000
Year 2	Rs. 1,20,000
Year 3	Rs. 1,50,000

C’s share of profit till death is to be calculated on the basis of average profit.

First calculate average profit:

Average profit = (Rs. 90,000 + Rs. 1,20,000 + Rs. 1,50,000) / 3
Average profit = Rs. 1,20,000

Now calculate C’s share for 3 months:

C's share = Rs. 1,20,000 x 3/12 x 1/6
C's share = Rs. 5,000

The answer is the same here because the average profit happens to be Rs. 1,20,000. In another question, it may be different.

Method 3: Sales Basis or Turnover Basis

Sales basis is used when the question gives sales up to the date of death.

Here, profit is estimated by using the profit rate from the previous year.

The formula is:

Profit rate on sales = Previous year's profit / Previous year's sales

Then:

Estimated profit till death = Sales till date of death x Profit rate on sales

Finally:

Deceased partner's share =
Estimated profit till death x Deceased partner's share

This method is useful when sales for the part-year are known. Instead of assuming profit evenly by time, the calculation follows actual sales made during the period.

Example: Sales Basis

A, B, and C are partners sharing profits in the ratio 3:2:1. C died on 30 June.

The previous year’s profit was Rs. 1,50,000 and previous year’s sales were Rs. 10,00,000. Sales from 1 April to 30 June were Rs. 2,00,000.

Calculate C’s share of profit till death.

First calculate the profit rate on sales:

Profit rate = Rs. 1,50,000 / Rs. 10,00,000
Profit rate = 15%

Now estimate profit on current sales up to the date of death:

Estimated profit = Rs. 2,00,000 x 15%
Estimated profit = Rs. 30,000

C’s share is 1/6:

C's share = Rs. 30,000 x 1/6
C's share = Rs. 5,000

So Rs. 5,000 is C’s share of profit till the date of death.

Journal Entry for Profit Till Date of Death

When the deceased partner’s share of profit is calculated, it is credited to the deceased partner’s capital account.

The usual entry is:

Particulars	Debit	Credit
Profit and Loss Suspense A/c Dr.	Amount
To Deceased Partner’s Capital A/c		Amount

For example, if C’s share of profit till death is Rs. 5,000:

Particulars	Debit	Credit
Profit and Loss Suspense A/c Dr.	Rs. 5,000
To C’s Capital A/c		Rs. 5,000

The account is called Profit and Loss Suspense because final profit for the full year has not yet been calculated.

What If There Is a Loss Till Date of Death?

If the question says there is a loss, the deceased partner must bear their share of that loss.

In that case, the entry is reversed:

Particulars	Debit	Credit
Deceased Partner’s Capital A/c Dr.	Amount
To Profit and Loss Suspense A/c		Amount

This reduces the amount payable to the deceased partner.

Do not automatically assume profit. Read whether the question gives profit or loss.

Where This Amount Appears in the Capital Account

In the deceased partner’s capital account, profit till the date of death appears on the credit side because it increases the amount due.

Deceased Partner’s Capital Account	Debit	Credit
To Drawings A/c
To Interest on Drawings A/c
To Revaluation A/c, if loss
By Balance b/d
By Goodwill adjustment
By Revaluation A/c, if profit
By Profit and Loss Suspense A/c, profit till death		Amount

After all adjustments are recorded, the final balance is transferred to the executor’s account.

How to Count the Period Correctly

This is a small step, but it affects the final answer.

If the books close on 31 March and the partner dies on 30 June, the period is:

April, May, June = 3 months

If the partner dies on 12 June, and the question expects days, count from 1 April to 12 June:

April = 30 days
May = 31 days
June = 12 days
Total = 73 days

Then use:

Annual profit x 73/365 x Deceased partner's share

If the question says to take months, follow months. If it gives exact dates and expects exact calculation, use days.

Quick Comparison of the Methods

Method	Use when	Main calculation
Previous year’s profit basis	Last year’s profit is given	Previous profit x Time x Share
Average profit basis	Past years’ profits are given	Average profit x Time x Share
Sales basis	Sales till death are given	Sales till death x Profit rate x Share

The final step is the same in all three methods: multiply by the deceased partner’s profit share.

Common Mistakes to Avoid

Mistake	Why it is wrong
Taking full year’s profit	The deceased partner is entitled only up to the date of death
Forgetting the time fraction	Annual profit must be adjusted for part of the year
Using new profit sharing ratio	The deceased partner’s share is based on the old profit sharing ratio
Using total past profits instead of average profit	Average profit must be calculated first
Forgetting to pass the journal entry	Calculation alone is not enough in an accounts answer
Crediting executor directly	Usually the amount first goes to the deceased partner’s capital account

The most important of these is the old ratio point. The deceased partner’s profit till death belongs to the old firm period, so the old profit sharing ratio is used.

A Simple Checklist Before You Write the Final Answer

Before finalising the answer, ask yourself:

1. What is the date of the last balance sheet?
2. What is the date of death?
3. Is the basis previous profit, average profit, or sales?
4. What is the deceased partner’s old profit share?
5. Is the result a profit or a loss?
6. Have I passed the correct Profit and Loss Suspense entry?

If all six answers are clear, your calculation will usually be correct.

Frequently Asked Questions

What is profit till date of death in partnership accounts?

It is the deceased partner’s share of estimated profit from the date of the last balance sheet up to the date of death. This amount is added to the deceased partner’s capital account.

Why is Profit and Loss Suspense Account used?

It is used because the final profit for the whole accounting year is not yet known. The firm estimates the deceased partner’s share for the part-year and records it through Profit and Loss Suspense Account.

Which ratio is used to calculate the deceased partner’s share?

The old profit sharing ratio is used because the profit belongs to the period before death, when the deceased partner was still a partner in the firm.

What is the formula on time basis?

The formula is previous year’s profit or average profit multiplied by the time fraction and then multiplied by the deceased partner’s share.

What is the formula on sales basis?

First calculate the profit rate using previous year’s profit and previous year’s sales. Then apply that rate to sales up to the date of death and multiply by the deceased partner’s share.

Is profit till death credited to the executor’s account directly?

Usually, no. It is first credited to the deceased partner’s capital account. After all adjustments are made, the final balance of the capital account is transferred to the executor’s account.

What if the result is a loss instead of profit?

The deceased partner’s capital account is debited with the share of loss. This reduces the amount payable to the deceased partner’s estate.

Should months or days be used for the time period?

Follow the question. If the period is clearly in complete months, months are usually used. If exact dates are given and the question expects a precise answer, use days.