Practicing Success
If goodwill already exists in the books of the firm at the time of admission of a partner then it will be dealt in the following manner. |
Old Partner's Capital A/c - Dr; Goodwill A/c - Cr New Partner's Capital A/c - Dr; Goodwill A/c - Cr Gaining Partner's Capital A/c - Dr; Sacrificing Partner's Capital A/c - Cr Sacrificing Partner's Capital A/c - Dr; Gaining Partner's Capital A/c - Cr |
Old Partner's Capital A/c - Dr; Goodwill A/c - Cr |
The correct answer is Option (1) → Old Partner's Capital A/c - Dr; Goodwill A/c - Cr. Goodwill appearing in the books will be written-off by debiting old partners' capital accounts in their old profit sharing ratio. Thereafter new value of goodwill will be given effect by crediting sacrificing partners' capital accounts and debiting new partners' current account. |