What is the sequence of treating goodwill at the time of retirement or death of a partner?
A) Calculate share of retiring partner in goodwill
B) Calculate the gaining ratio of partners
C) Adjust amount of goodwill to retiring partner

ABC

The correct answer is option 1- ABC.

A) Calculate share of retiring partner in goodwill: - This step involves determining the retiring partner's share of the goodwill of the partnership. Goodwill represents the value of the firm's reputation. The retiring partner's share of goodwill is usually calculated based on the agreed-upon method in the partnership agreement.

B) Calculate the gaining ratio of partners: - The gaining ratio is calculated to adjust the distribution of goodwill share of retiring partner among the remaining(gaining) partners. The gaining ratio is determined by considering the profit-sharing ratio of the existing partners and any changes resulting from the retirement of a partner.

C) Adjust amount of goodwill to retiring partner: - Once the retiring partner's share of goodwill has been calculated and the gaining ratio has been determined, any adjustments to the retiring partner's capital account are made. Gaining partner account are debited and retiring partner account is credited.

So, Gaining ratio of the continuing partners and share of goodwill of retiring partner is calculated. After finding out the share it will be distributed by passing a journal entry with debiting continuing partners account in their gaining ratio and crediting the retiring partner.

NOTE- AMONG STEP A & B, ANYONE CAN BE CALCULATED FIRST. BUT STEP C WILL BE DONE IN THE LAST DEFINITELY. So, correct answer is option 1.