Question : A,B and C are partners sharing profits in the ratio of 3:2:1. C died on 1st July, 2023. On this date, final accounts were prepared to ascertain profits for the period. It resulted in a profit of 1,75,000 to the firm. To give effect to the above:
Option 1: Profit and Loss Account will be debited.
Option 2: Profit and Loss Appropriation Account will be debited.
Option 3: Profit and Loss Account will be credited.
Option 4: Profit and Loss Appropriation Account will be credited.
Correct Answer: Profit and Loss Appropriation Account will be debited.
Solution : In case of death of a partner. the profit upto the death of partner is transferred to Profit & Loss Suspense A/c. But in the absence of Profit & Loss A/c, such profit is transferred to the Profit & Loss Appropriation A/c.
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