M, N and O were partners sharing profits and losses in the ratio of 4:3:2. O died on 15 July 2019 on
which date the capital M, N and after all necessary adjustment stood at
65,000 and 45.000 respectively. Mand N continued to carry on the business for 6 months without
setting the account of o
During the period of 6 months ended 315 December, 2019, a profit of 30.000 is eamed by the fimm.
States which of the two options available with O s Executor under section 37 of the Indian Partnership
Act, 1932 should be exercised?
11
Answers
Explanation:
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.
O's profit share = 4/16 or 1/4
Profit for the year = Rs. 24000
Profit from 1.4.2006 - 30.6.2006 = Rs. 24000 / 4
= Rs. 6000
O's share in profit till the date of death = Rs. (6000 * 1) / 4
= Rs. 1500