On retirement of a partner, goodwill will be credited to the Capital Account of:
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Retiring Partner.
On retirement of a partner, goodwill will be credited to the Capital Account of Retiring Partner.
When goodwill does not appear in the books of the firm, credit is given to the retiring partner for the share in goodwill by debiting the goodwill account to gaining partners capital accounts (individually) in their gaining ratio. The journal entry is :
Gaining Partners Capital A/c Dr. (Individually)
To Retiring Partners Capital A/c
(Share in goodwill of retiring partner adjusted)