Need for valuation of goodwill arises in the following circumstances:
(A) Admission of a new partner
(B) Change in profit sharing ratio among the existing partners
(C) Dissolution of the partnership firm involving sale of business as a going concern
(D) Death of a partner
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A), (B), (C) and (D)
Goodwill has to be valued whenever a partner’s right to future profits changes or the business is sold as a whole:
(A) Admission of a new partner — True. The new partner pays for his share of the firm’s goodwill.
(B) Change in profit sharing ratio among the existing partners — True. The gaining partner compensates the sacrificing partner.
(C) Dissolution of the partnership firm involving sale of business as a going concern — True. The buyer pays for the goodwill of the running business.
(D) Death of a partner — True. The deceased partner’s executors get his share of goodwill.
NCERT (2026-27 edition):
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