How is Death of Partner explained?
For a partnership which comprises of more than 2 partners, financial data associated to the death of a partner is required, relying upon what the rest of the partners determine. This data incorporates the inclination (disposition) of the interest of the dead partner and distribution of shares of profits or losses to the dead.
What is deceased partner?
According to the Indian Partnership Act, 1932. Under a contract between the partners of the enterprise is not dissolved by the death of a partner, the estate of a dead partner is not responsible for any act of the enterprise done after his death.
The accounting treatment in the occurrence of death of a partner is :
- Similar to that, when a partner retires and that in case of deceased partner his assertion is transferred to his legal enforcers and settled in the similar way as that of the partner who retires
- However, there is one primary distinction, the retirement usually takes place during the closure of an accounting period or a financial year, the death of a partner may take place any time
- Therefore, in case of a partner, his rights shall also incorporate his share of gains or loss, interest on drawings (if any), interest on capital from the last date of the Balance Sheet to the date of his death of these, the main issue associates to the computation of profit for the interceding period
- Since, it is contemplated burdensome to close the books and outline final a/c, for the period, the dead partner’s share of profit may be computed on the ground of previous year’s gain (or aggregate of past few years) or on the base of sales
The above mentioned is the concept that is explained in detail about Death of a Partner for the class 12 Commerce students. To know more, stay tuned to BYJU’S.