Death of a Partner: Time-Apportioned Profit Share and Executor's Account

Death, unlike retirement, can happen on any date during the accounting year — so at the date of death, the firm's actual profit for the full year is not yet known. The deceased partner's share of profit for the period from the start of the accounting year up to the date of death must therefore be estimated, using one of two common bases:

1. Time basis — the previous year's profit (or the average of several past years' profits, if the firm's policy or the question specifies) is apportioned by the fraction of the year the deceased partner was alive, and then the partner's own profit-sharing ratio is applied. (The order of these two steps — ratio first or time-fraction first — does not matter; both give the same figure, which is a handy way to double-check the calculation.)
2. Turnover (sales) basis — used when sales figures for the part-period are available and the business is not seasonal in a way that would distort a simple time split; profit is estimated in proportion to the turnover for that part of the year compared to the previous full year's turnover, then the deceased partner's share is applied.

The estimated amount is recorded through a Profit & Loss Suspense Account: this account is debited and the deceased partner's Capital Account is credited. The Suspense Account balance is later closed off against the firm's ACTUAL profit for the full year, once that becomes known. …