Q.M, N and O are partners sharing profits in the ratio 4:3:3. The firm closes its books on 31st March every year. O dies on 30th June, three months into the new accounting year. The firm's profit for the previous full year (ended 31st March) was Rs 1,20,000. In the absence of any other information, calculate O's share of profit up to the date of death, on the basis of the previous year's profit and on a time basis.

When a partner dies partway through the year, their share of profit for the part-year they were alive must still be estimated and credited to them, usually using the previous year's profit spread evenly over time.

Step 1 — O's share ratio. M : N : O = 4 : 3 : 3 (10 parts total), so O's share = 3/10.

Step 2 — O's notional full-year share of the previous year's profit. 3/10 × Rs 1,20,000 = Rs 36,000. This is treated as a reasonable estimate of what O's share would be if the current year's profit turned out similar to last year's.

Step 3 — Apportion this by time. O was alive for 3 months of the new accounting year (1 April to 30 June) out of 12 months. O's share up to death = Rs 36,000 × 3/12 = Rs 9,000.

Step 4 — Dual-solve check (reverse the order of multiplication). Instead of finding the full-year share first, first find the firm's estimated profit for the 3-month period: Rs 1,20,000 × 3/12 = Rs 30,000. Then take O's share of THIS: 3/10 × Rs 30,000 = Rs 9,000. Both orders of calculation give the identical figure of Rs 9,000, confirming the answer.

Step 5 — Accounting entry. Profit & Loss Suspense A/c Dr Rs 9,000; To O's Capital A/c Rs 9,000. This Suspense account is later closed off against the actual profit the firm earns for the full year in which the death occurred.

If sales figures for the part period were available instead of relying on the previous year's total profit, the firm could instead use the turnover (sales) basis: O's share of profit = (sales up to date of death / total sales of the previous year) × previous year's profit × O's profit share — giving a more accurate estimate when the business is seasonal.

Students frequently apply the time fraction to the wrong figure — for example, taking 3/12 of the FIRM's profit directly and forgetting to also apply O's own profit-sharing ratio, or vice versa. Both the ratio and the time fraction must be applied; only the order in which they are applied can be swapped.