Valuation of Goodwill takes place on which of the following occasions:

A. Incorporation of a new business
B. Change in profit sharing ratio
C. Amalgamation of partnership firm
D. Admission of a partner
E. Dissolution of firm or closure of business

Choose the correct answer from the options given below.

B, C, and D only

The correct answer is option 2- B, C, and D only.

 Over a period of time, a well-established business develops an advantage of good name, reputation and wide business connections. This helps the business to earn more profits as compared to a newly set up business. In accounting, the monetary value of such advantage is known as “goodwill”. Normally, the need for valuation of goodwill arises at the time of sale of a business. But, in the context of a partnership firm it may also arise in the following circumstances:

• 1. Change in the profit sharing ratio amongst the existing partners;
• 2. Admission of new partner;
• 3. Retirement of a partner;
• 4. Death of a partner;
• 5. Dissolution of a firm involving sale of business as a going concern.
• 6. Amalgamation of partnership firms.