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Question

A, B and C are the partners sharing profits in the ratio 7 : 5: 4. C died on 30th June and profit for the accounting year was Rs. 48,000. How much share in profits for the period 1st April to 30th June will be credited to C's Account?

A
Rs.12,000
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B
Rs.3,000Rs.3,000
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C
Rs.18000
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D
Rs.4,000
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Solution

The correct option is A Rs.3,000Rs.3,000
At the time of death of a partner the firm gets reconstituted. In the reconstitution all assets and liabilities are revalued, profit sharing ratio gets revised, goodwill is raised etc. and finally the amount due to deceased partner is determined and discharged. The representative of deceased partner will be entitled to the partner's share of profit from the beginning of the year to the date of the death. This amount should be credited to his executor's account.
C's profit share = 4/16 or 1/4
Profit for the year = Rs. 48000
Profit from 1.4.2006 - 30.6.2006 = Rs. 48000 / 4
= Rs. 12000
O's share in profit till the date of death = Rs. (12000 * 1) / 4
= Rs. 3000

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