A, B and C are partners sharing profits in the ratio of 5 : 3 : 2. On retirement of C, the goodwill already appears in the balance sheet at ₹24,000. The goodwill will be written off:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) - By debiting all partner's capital accounts in their old profit sharing ratio.
The existing goodwill is the written off by debiting the partner's capital account in the old ratio of the partners and crediting goodwill. The following journal entry is passed for this-
Partner's Capital A/c Dr.
To goodwill A/c