Discuss the various methods of computing the share in profits in the event of death of a partner.
Discuss the various methods of computing the share in profits in the event of death of a partner.
There are two methods of calculating share of profit of deceased partner.
Firstly on the basis of time : Under this method, we need to find the basis on which the profit for the year in which partner dies is to be calculated, then we reduce it to the number of months or days for which he is alive and then we multiply the resultant figure with the deceased partner's share to find his share in profit. This profit or loss will be shown by the name Profit and Loss Suspense Account.
Secondly on the basis of turnover : Under this method we need to find the profit and sales of the previous year and then we will calculate profit percent, later this percent will be multiplied with the sales of the period for which partner is alive. Resultant figure will be multiplied with the share of deceased partner.
There are two methods of calculating share of profit of deceased partner.
Firstly on the basis of time : Under this method, we need to find the basis on which the profit for the year in which partner dies is to be calculated, then we reduce it to the number of months or days for which he is alive and then we multiply the resultant figure with the deceased partner's share to find his share in profit. This profit or loss will be shown by the name Profit and Loss Suspense Account.
Secondly on the basis of turnover : Under this method we need to find the profit and sales of the previous year and then we will calculate profit percent, later this percent will be multiplied with the sales of the period for which partner is alive. Resultant figure will be multiplied with the share of deceased partner.
