— Kishore V, SME and ACW at Edumarz
There are two techniques for estimating a dead partner’s profit share.
To begin with, let’s look at time:
- To calculate the deceased partner’s share of profit, we must first determine the basis on which the profit for the year in which he dies is to be calculated, then reduce it to the number of months or days for which he is alive, and finally multiply the resultant figure by the deceased partner’s share of profit.
The Profit and Loss Suspense Account will display this profit or loss.
- Second, on the basis of turnover: In this technique, we must first determine the previous year’s profit and sales, after which we will compute profit per cent, which will then be multiplied by the sales for the time in which the partner is alive.
- The resulting number will be multiplied by the dead partner’s portion.