Ram, Karan and Shyam are partners. On retirement of Ram, the goodwill already appears in the Balance Sheet at Rs. 32,000. The goodwill will be written-off:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → By debiting the capital accounts of Ram, Karan and Shyam in their old profit sharing ratio
Goodwill already sitting in the Balance Sheet was built up while all three partners shared the profits. When it is written off on Ram’s retirement, the loss belongs to everyone who owned it, so it is written off among all the partners, Ram included, in their old profit sharing ratio. The retiring partner’s own share of the firm’s current goodwill is then settled separately.
Why the other options are incorrect
Option (2) By debiting the capital accounts of Karan and Shyam in their new profit sharing ratio — Incorrect. It leaves Ram out of a loss on an asset he owned, and the new ratio applies only to future profits.
Option (3) By debiting the capital account of Ram from his share of goodwill — Incorrect. Ram owned only his share of the old goodwill, so he cannot bear the whole write-off.
Option (4) By debiting the capital accounts of Karan and Shyam in their old profit sharing ratio — Incorrect. The ratio is right but the group is wrong; Ram must also bear his part.
NCERT (2026-27 edition):
NCERT (2026-27 edition):
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