Question : Sanjay, Ajay and Karan were partners sharing profits in the ratio of 3: 2: 1. Karan died on 31st July, 2020. Sanjay and Karan decided to continue the business. Share of profit or loss of the deceased partner from the beginning of the year up to the date of death was to be determined on the basis of last years profit. Last year loss was Rs. 1,80,000. Choose the correct option
Option 1: Profit and loss suspense account will be debited by Rs 10,000
Option 2: Profit and loss suspense account credited by Rs 10,000
Option 3: Profit and loss account debited by Rs 10,000
Option 4: Profit and loss suspense account credited by Rs 10,000
Correct Answer: Profit and loss suspense account credited by Rs 10,000
Solution : Answer = Profit and loss suspense account credited by Rs 10,000
In this scenario, the profit or loss of the deceased partner, Karan, until the date of his death will be determined based on the previous year's profit, which was a loss of Rs. 1,80,000. Since the business continues, the loss will be transferred to the Profit and Loss Account, crediting the Profit and Loss Suspense Account by Rs. 10,000 to balance the accounts.
Hence, the correct option is 4.
