Change in partnership deed due to death of partner
Answers
When a partner dies, the company is either dissolved or run by the partners who are alive and the settlement in the books of accounts are made as follows:
“When the partner dies the amount payable to him/her is paid to his/her legal representatives. The representatives are entitled to the followings: (a) The amount standing to the credit to the capital account of the deceased partner (b) Interest on capital, if provided in the partnership deed upto the date of death (c) Share of goodwill of the firm; (d) Share of undistributed profit or reserves (e) Share of profit on the revaluation of assets and liabilities (f) Share of profit upto the date of death; (g) Share of Joint Life Policy.”
“The following amounts are debited to the account of the deceased partner’s legal representatives: (i) Drawings (ii) Interest on drawings (iii) Share of loss on the revaluation of assets and liabilities (iv) Share of loss that has occurred till the date of his/her death.”
“The above adjustments are made in the capital account of the deceased partner and then the balance in the capital account is transferred to an account opened in the name of his/her executor.”
“The payment of the amount of the deceased partner depends on the agreement. In the absence of an agreement, the legal representative of a deceased partner is entitled to interest @ 6% p.a. on the amount due from the date of death till the date of final payment.”