Question

death of a partner for accounts

Answer 1

Death of a partner dissolves the partnership and the rights of the representatives of the deceased partner would depend on the provisions of the partnership deed. Usually, the surviving partners carry on the business, purchasing the share of the deceased partner after determining the among due to him and then treating it as a loan to the firm. There are no special problems in death except that death may occur at any time of the year; this would mean that the executors of the deceased partner would be entitled to the decreased partner’s share of profits arising after the last closing up of accounts to the date of accounts death.

The partnership deed usually states how this share is to be determined. In the absence of any agreement or decision by arbitration, accounts will have to be prepared as on the date of death and the profit or loss ascertained. Apart from this additional point regarding the deceased partner’s share of profits up the date of his death, the treatment in accounts is not different from that in case of retirement. After ascertaining the amount due to the deceased partner, the balance in his capital account should be transferred to an account opened in the name of his executors.

It should be noted that under section 37 of the Partnership Act, the executors would be entitled, at their choice, to interest at 6% p.a. on the amount due from the date of death to the date of payment or to that portion of profit which is earned by the firm with the help of the amount due to the deceased partner. This also applies to a retiring partner.