In which account goodwill is transferred if it appears in the balance sheet at the time of dissolution of the partnership firm?

Realisation A/c

The correct answer is option 1- Realisation A/c.

Goodwill is transferred to realisation account like other assets if it appears in the balance sheet at the time of dissolution of the partnership firm.

When the firm is dissolved, its books of account are to be closed and the profit or loss arising on realisation of its assets and discharge of liabilities is to be computed. For this purpose, a Realisation Account is prepared to ascertain the net effect (profit or loss) of realisation of assets and payment of liabilities which may be transferred to partner’s capital accounts in their profit sharing ratio. Hence, all assets like furniture, goodwill, machinery (other than cash in hand bank balance and fictitious assets, if any), and all external liabilities are transferred to this account. It also records the sale of assets, and payment of liabilities and realisation expenses. The balance in this account is termed as profit or loss on realisation which is transferred to partners’ capital accounts in the profit sharing ratio.