What journal entry will be recorded for writing off the goodwill already existing in Balance Sheet at the time of retirement of a partner?
Answer & explanation
Correct answer: option 2
The correct answer is option 2-
All Partner's Capital A/c Dr. (in old ratio)
To Goodwill A/c
(Goodwill written off)
All Partner's Capital A/c are debited to write off the goodwill as they their capital balance is reduced in case of writing off. Goodwill is credited as it have to be written off and does not exist in the books of account anymore. Goodwill is written off in old ratio as before retirement partners are sharing profits and losses in old ratio.