• Death of a partner dissolves the partnership. However, the firm may continue with a new partnership agreement.
  • In both the cases i.e.retirement or death, a partner leaves the firm, hence, claims will be settled almost in the same manner in both the cases.
  • In case of the death of a partner, the payment of the amount due to him is made to his legal representatives.
  • At the time of death of a partner, he is entitled to receive capital standing to his credit, share in goodwill, share in reserve, share of profit till the date of death, etc. Interest on capital is given from the beginning of the financial year to the date of death.
  • Treatment of goodwill is same as in the case of retirement of a partner.
  • Treatment of other items like profit/loss on revaluation, undistributed profits/reserves, drawings, etc. is same as in case of retirement of a partner.
  • Balance in deceased partner’sA/c will be transferred to his Executor’s A/c.
  • The amount due to the executor of the deceased partner can be settled by payment of full amount, full amount is treated as a loan or amount is partly paid in cash and the remaining amount is treated as a loan when loan account is settled by paying installments including principal and the interest.
  • Share of profits of deceased partner can be calculated on the basis of time or sales.
  • On the basis of time, previous year’s profit from the date of last Balance Sheet to the date of death is calculated and his share is calculated proportionately.
  • On the basis of sales, proportionate share is calculated by dividing sales from the date of last Balance Sheet with previous year’s sale and multiplying by previous year's profit.

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