Ganesh, Hari and Mahadev are partners. On retirement of Ganesh, the goodwill already appears in the Balance Sheet at Rs. 24,000. The goodwill will be written-off by:

Debiting capital accounts of Ganesh, Hari and Mahadev in their old profit sharing ratio.

Correct answer: Option (1) → Debiting capital accounts of Ganesh, Hari and Mahadev in their old profit sharing ratio.

Concept: Treatment of existing (already recorded) goodwill on retirement, per Reconstitution of a Partnership Firm – Retirement/Death of a Partner.

When goodwill already appears in the Balance Sheet, it must first be written off by debiting ALL partners’ capital accounts (including the retiring partner Ganesh) in their OLD profit sharing ratio and crediting the Goodwill A/c. Only thereafter is the retiring partner separately compensated for his share of goodwill by the gaining partners. Hence Option (1).