A, B and C are partners in a firm. If C retires/dies, his capital account is credited with:

His share of goodwill

The correct answer is Option (1) → His share of goodwill

When a partner retires or dies, the firm must compensate them (or their legal representatives) for their share of goodwill — i.e., the portion of the firm’s goodwill they helped to create.

Hence, the retiring or deceased partner’s capital account is credited with his share of goodwill.