Excess of total capital of the firm over the actual combined capital of partners is known as................

Hidden goodwill of the firm

The correct answer is option 3- Hidden goodwill of the firm.

Excess of total capital of the firm over the actual combined capital of partners is known as Hidden goodwill of the firm.

When the total capital of the firm (as agreed upon by the partners) is more than the actual combined capital contributed by all partners, the difference is referred to as Hidden Goodwill. This type of goodwill is not found directly in the books but is inferred from the capital arrangement.

If the firm has agreed to settle the retiring or deceased partner’s account by paying him a lump sum amount, then the amount paid to him in excess of what is due to him, based on the balance in his capital account after making necessary adjustments in respect of accumulated profits and losses and revaluation of assets and liabilities, etc., shall be treated as his share of goodwill (known as hidden goodwill).