A & B were partners in a partnership firm. Due to the ill health of B they decided to dissolve the firm. The position of assets and liabilities on the date of dissolution was:
| LIABILITIES | AMOUNT (₹) | ASSETS | AMOUNT (₹) |
| Loan by B | 20,000 | Goodwill | 30,000 |
| Capitals | Furniture | 40,000 | |
| A 1,00,000 | Building | 90,000 | |
| B 1,40,000 | 2,40,000 | Debtors | 50,000 |
| Cash | 50,000 | ||
| 2,60,000 | 2,60,000 |
It was agreed that following transactions will take place:
a) A wanted to start the business in sole proprietorship so he took building and furniture at 10% less than book value.
b) All the debtors proved good except a person C who did not pay ₹10,000
The treatment of goodwill appearing in the balance sheet will be:
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Transferred to Debit of Realisation A/c.
As all Intangible or fixed assets are transferred to debit side of Realisation account. Goodwill is an intangible asset, so it is transferred to debit side of Realisation account.