P, Q and R share profits equally. At the time of P's retirement, goodwill appears in the books at Rs. 3000. P will be credited with...... amount for Goodwill share.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 1000
A retiring partner is entitled to his share of the firm's goodwill, because the goodwill was built up with his efforts too. Here the goodwill in the books is Rs. 3,000 and P, Q and R share profits equally, so each partner's share is one-third.
P's share of goodwill = Rs. 3,000 x 1/3 = Rs. 1,000
P's capital account is credited with this Rs. 1,000. The whole goodwill of the firm (Rs. 3,000) is never credited to one partner, because Q and R own two-thirds of it.