Death of a partner Notes4

Study Material & Notes for the Chapter 7

Partnership - Death of a partner

IV.   SETTLEMENT OF EXECUTOR’S CLAIM

A.  Settlement of Deceased Partner’s Executor’s Claim – In Lumpsum

Deceased partners’ executor’s claim is paid either out of the funds available with the firm or out of funds brought in by the remaining partners.

DEATH OF A PARTNER 4A
B. Settlement of Deceased Partner’s Executor’s Claim – In Installments
  • Amount due to deceased partner’s executor is paid in instalments. Usually, some amount is paid immediately and the balance is transferred to his loan account.
  • This loan is paid in one or more instalments and the loan amount carries some interest.
  • In the absence of any agreement on interest rate, the retiring partner can claim interest @ 6% [as per Section 37 of the Indian Partnership Act 1932]
  • Installment has two parts – Principal Amount of Loan and Interest at agreed rates
  • Interest due on loan amount is credited to deceased partners’ executor’s loan account.
  • Instalment inclusive of interest then is paid to the deceased partner’s executor as per schedule agreed upon.

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