partnership joint life policy

This query is : Resolved

yogesh mahipal (Querist)
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24 September 2010 A,B & C are partner sharing profits in the ratio of 1:1:1.They had a joint life policy of Rs. 1 lac. C died on 1 july 2010. Acconts are closed on 31 dec every year. Insurance company pay the amount of Rs. 1 lac on 31 dec 2010 . policy's premium is charged to P & L a/c every year. His nominee wants to take away the policy amount for his personal purpose as soon as it is received from insurance company. Then in this i want to know the entries with DATES

Thrissurkkaran Ishtan

Thrissurkkaran Ishtan (Expert)
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24 September 2010 Who is the nominee of the policy?
Have the partners agreed that the claim amount will go to the family of the partner or will it be accrued to the business?

shakuntala chhangani

shakuntala chhangani (Expert)
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26 September 2010 Hi Yogesh, upon C's death, the JLP matures and the firm receives Rs. 1lakh. however it belongs to the firm as premium was paid by firm. since the premium was charged to P/l A/c, the book value of the policy is nil and the amount received being the profit will be tranferred to partners capital account in the ratio of 1:1:1. Now is the question of nominee taking the amount from firm. For this u will hv to look into the partnership deed for terms of settlement upon death of a partner. But if the claims of deceased partner are not settled immediately, sec. 37 applies. As per sec. 37, legal heirs of the deceased partner are entitled to 6% simple interest on outstanding balance or share of profit from the date of death to settlement date in proportion to their outstanding balance to total capital employed in the business including their dues.
Regards, CA Shakuntala Chhangani

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