Accountancy Part AAdmission of a Partner

Hidden Goodwill is :

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Inferred from the arrangement of capital and profit sharing ratio

When the value of goodwill is not given on admission, it is worked out from the new partner’s capital and share: the capital of the whole firm implied by his contribution, less the actual capital of all partners, is the hidden goodwill.

Why the other options are incorrect

Option (1) Not disclosed to partners — Incorrect. “Hidden” means its value is not stated, not that it is kept secret from the partners.
Option (3) Brought into the book of accounts as an unrecorded Assets — Incorrect. It is adjusted through the partners’ capital or current accounts, not raised as an asset.
Option (4) Not considered while calculating the capital contribution of new partner — Incorrect. It is found from the new partner’s capital contribution itself.

NCERT (2026-27 edition):
Hidden Goodwill – “… Sometimes the value of goodwill is not given at the time of admission of a new partner. In such a situation it has to be inferred from the arrangement of the capital and profit sharing ratio.”