Death of a partner

The death of a partner is treated much like retirement, with one difference: death can happen at any time in the year, so profit, interest and other items usually have to be worked out up to the date of death.

The deceased partner's capital account is prepared first. It is credited with:

• his capital balance;
• his share of reserves and accumulated profits;
• his share of revaluation profit;
• his share of goodwill;
• his share of profit up to the date of death;
• interest on capital up to the date.

It is debited with his drawings, interest on drawings, and his share of any losses (revaluation loss, accumulated loss).

The balance is what the firm owes him, and it is transferred to his executors' account (his legal representatives). The executors may be paid at once, or in instalments, with interest on the unpaid balance, just like a retiring partner's loan.

Example of profit to the date of death: Kiran (2/5) dies on June 15, 2½ months into the year, and the average profit is 16,000. His share: 16,000 × 2.5/12 × 2/5 = 1,333.