A, B and C are partners sharing profits in the ratio of 5 : 3 : 2. On retirement of C, the goodwill already appears in the balance sheet at ₹24,000. The goodwill will be written off:
Answer & explanation
Correct answer: option 1
The correct answer is option 1- By debiting all partner's 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 capital accounts of partners and eliminate goodwill from the books.