Partners Aakash, Bharat, and Chirag are in partnership. On Aakash’s retirement, goodwill already appearing in the books amounts to ₹24,000.
How should this goodwill be treated in the accounts on the retirement of partner?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- It should be written off by debiting all partners' capital accounts in their old profit-sharing ratio.
Existing goodwill is written off by debiting old partners capital account in their old ratio and crediting goodwill. It will reduce the capital balance of the all the old partners account including retiring partner.