Question

On the death of a partner, his executor is paid the share of profits of the died partner for the relevant period. This payment is recorded in Profit & Loss _______ A/c

• A. Adjustment
• B. Appropriation
• C. Suspense
• D. Reserve

Answer 1

The correct option is C Suspense

A P&L suspense account is used to record some fictitious profits for the purpose of settlement of share of profits to a deceased partner. Later, such errors are identified and rectified and accordingly adjusted in the books of accounts so that the balance of the P&L suspense a/c is zero.

In case of a death of a partner, share of deceased partner in the profit or losses of the firm (till the death of his/her death) is paid through profit and loss suspense account. At the time of the death of the partner, profit and loss account will not be debit or credit because, it is not possible for the firm to alter the books during the year, thus on the date of a death of a partner profit and loss account is debited or credited.