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.