When a partner dies, the partnership accounts need to be adjusted to determine the amount due to the deceased partner's estate. This involves several steps that must be followed in a specific sequence to ensure accuracy and compliance with accounting principles. The question asks for the correct order of these steps.

Accounting Sequence at the Time of a Partner's Death

Let's analyze the provided options and the correct sequence indicated:

• (A) Amount paid to Executor
• (B) Preparation of Revaluation account
• (C) Calculation of Amount Payable to Executor of Deceased Partner
• (D) Calculation of Revaluation Gain/Loss
• (E) Balance of Executor’s loan A/c

The correct sequence, according to the provided answer, is (D), (B), (C), (A), (E). Let's break down why this sequence is considered correct, even though the order of (D) and (B) might seem counter-intuitive in standard accounting practice where preparation (B) usually precedes calculation of gain/loss (D). However, following the given options, we explain the steps in the specified order.

Step-by-Step Explanation of the Sequence (D), (B), (C), (A), (E)

1. (D) Calculation of Revaluation Gain/Loss: This step signifies the need to determine the impact of revaluing assets and liabilities at the time of the partner's death. While the physical preparation of the account typically precedes this, this step might imply initiating the process or identifying the result that needs to be accounted for.
2. (B) Preparation of Revaluation account: After identifying the need or expected result (D), the Revaluation Account is prepared. This account records the increases and decreases in the value of assets and liabilities. The net result of this account gives the revaluation gain or loss, which is then transferred to partners' capital accounts (including the deceased partner's account) in their old profit-sharing ratio.
3. (C) Calculation of Amount Payable to Executor of Deceased Partner: Once the revaluation gain or loss (from steps D and B) is adjusted in the deceased partner's capital account, along with their share of goodwill, accumulated profits/losses, salary/commission, interest on capital, and share of profit up to the date of death, the total amount due to the deceased partner's estate is calculated. This is the final balance in the deceased partner's capital account.
4. (A) Amount paid to Executor: After calculating the total amount payable (C), all or part of this amount may be paid to the executor of the deceased partner's estate.
5. (E) Balance of Executor’s loan A/c: If the full amount calculated in step (C) is not paid immediately in step (A), the remaining unpaid balance is transferred to the Deceased Partner's Executor's Loan Account. This balance represents the amount still owed by the partnership to the deceased partner's estate, which will be paid later according to the terms agreed upon.

Detailed Analysis of the Steps

Each step plays a crucial role in settling the deceased partner's claim:

• Revaluation: Assets and liabilities are revalued to their current values at the date of death. This gain or loss affects all partners' capital accounts.
• Adjustments: The deceased partner's capital account is adjusted for their share of reserves, accumulated profits/losses, goodwill, and profit/loss up to the date of death.
• Final Calculation: The deceased partner's final claim includes their capital balance, share of revaluation gain/loss, share of reserves/profits, goodwill adjustment, interest on capital, salary, less any drawings and interest on drawings.
• Settlement: The claim is settled either by immediate payment, transfer to a loan account, or a combination of both.

Based on the provided options and correct answer, the sequence (D), (B), (C), (A), (E) outlines the progression from identifying the revaluation outcome, preparing the necessary account, calculating the final amount due, making the payment, and finally accounting for any remaining balance as a loan.

Revision Table: Key Events at Partner's Death

Additional Information on Partner's Death Accounting

When a partner dies, the partnership deed usually specifies the procedures for settling the deceased partner's claim. If the partnership deed is silent, the provisions of the Indian Partnership Act, 1932 apply. The deceased partner's share includes:

• Credit balance of Capital Account.
• Credit balance of Current Account (if maintained).
• Share of goodwill of the firm.
• Share of accumulated profits and reserves.
• Share of profit from the last balance sheet date to the date of death.
• Interest on Capital (if provided in the deed).

Deductions from the deceased partner's share include:

• Debit balance of Current Account (if maintained).
• Share of accumulated losses.
• Drawings and Interest on Drawings.
• Share of revaluation loss.

The final amount is paid to the legal representative or executor of the deceased partner. Often, the amount is not paid immediately but transferred to the Executor's Loan Account, payable in installments with interest.