Death of partner

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CA SANJAY GARG (Querist)
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25 September 2011 While doing tax audit of Partnership Firm having 4 partners I came to know that one of the partner died on 30.09.2010 & new partnership deed is formed on 3rd october & share of died patner is transferred to his son which was one of the partner in firm. I have to prepare balance sheet of firm. I want to know how many balance sheets should I prepare & the period to be covered from 01.04.2010 to ????????

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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26 September 2011 It depends on the terms and conditions of the partnership deed. For example ,if the deed contains a clause stating that the books of account are to be closed on the death of a partner.... ,necessarily balance sheet has to be prepared for the period ended 30/09/2010 and another one for the period from 1/10/2010 to 31/03/2011.

CA SANJAY GARG

CA SANJAY GARG (Querist)
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27 September 2011 If partnership contains clause to prepare two balance sheets than how will I charge depreciation as per income tax means 180 dys rule........

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CA SANJAY GARG

CA SANJAY GARG (Querist)
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27 September 2011 Dear sir these are the exact clause in deed
12. That the partnership will not be discontinued on death, retirement, expulsion or insolvency of the partner. The business will be carried on as usual by remaining partners with legal representatives of the deceased partner and in case if such legal representative do not elect to remain as partner and also in case of retirement ,insolvency or expulsion of a partner, the business will be carried on as usual by the remaining partners and the share of the each deceased, expelled, retiring or insolvent partner will be taken over by the remaining partners or such other new partner or partners as may betaken in and the amount standing in the credit of such deceased, retired ,expelled , or insolvent partner will be paid in full after adjustment of profit or loss till the date of death, retirement, expulsion or insolvency as the case may be. The goodwill of the firm shall always vest with the existing partners only.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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27 September 2011 Based on the partnership deed clause cited above, books of accounts need not be closed on the date of death ,meaning thereby only one p & l account and one balance sheet need to be prepared for the financial year 2010-11. However, profit / loss should be shared on time basis upto the date of death ,based on sharing ratio's contained in old partnership deed ,and thereafter based on the new deed.