suspense account

This query is : Resolved 
 

(Querist) 08 December 2008

respected sir,
please let me know the exact defference between profit and loss account and profit and loss suspense account.


Mani VGS (Expert) 08 December 2008

I hope you should have seen this question from CPT ICAI material "Partnership Accoutning" chapter:

Profit and Loss account will be prepared at the end of the year in order to ascertain the profit or loss from the business. Usually [generally] this will be prepared at the end of the year.

But when a partner is going to die, he will not die exactly on the date of balance sheet. If that be the case, it is not death. It is a planned murder :)

If the accounting period is 1.1.08 to 31.12.08, and if a partner dies on 26.2.08, then the legal representative of the deceased partner is eligible to received profit for the relevant period [from 1.1.08]. Such profit share will be given from profit and loss suspense account. Because on 26.2.08 or on the date of settlement say [4.5.08], we will not generally prepare Profit and loss account. Instead profit and loss suspense a/c is prepared and amount to the legal representative is paid from this balance.

At the end of the year, P & l suspense balance is transferred to Profit and Loss account.

Dear experts, if I am wrong, please correct me!!!




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