At the time of Reconstitution, Goodwill already appearing in books of accounts is distributed among partners in....
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Old profit sharing ratio
Goodwill already in the books was built up while the old partners shared the profits, so it belongs to them. On reconstitution it is written off by debiting the old partners’ capital accounts in their old profit sharing ratio; the new value of goodwill is then given effect separately.
Why the other options are incorrect:
Option (2) New profit sharing ratio — Incorrect. The new ratio governs future profits; the existing goodwill was earned under the old arrangement.
Option (3) Gaining Ratio — Incorrect. The gaining ratio decides who pays the retiring partner for his share of goodwill, not how old goodwill is written off.
Option (4) Sacrificing Ratio — Incorrect. The sacrificing ratio decides who receives the new partner’s premium for goodwill.
NCERT (2026-27 edition): |