Match List-I with List-II. LIST I(Types of goodwill) LIST II(Treatmen…

Match List-I with List-II.

LIST I (Types of goodwill)	LIST II (Treatment to done)
(A) Existing Goodwill	(I) No entry passed
(B) Goodwill premium	(II) Inferred from the capital arrangement.
(C) Goodwill paid privately	(III) Written off
(D) Hidden goodwill	(IV) Credited to sacrificing partner

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → (A) - (III), (B) - (IV), (C) - (I), (D) - (II)

On the admission of a partner, goodwill can come up in four ways, and each needs its own treatment in the books.

(A) Existing Goodwill — this matches (III) Written off. Goodwill already in the books is written off among the old partners in their old ratio.

(B) Goodwill premium — this matches (IV) credited to sacrificing partner. The premium brought by the new partner is shared by the old partners in their sacrificing ratio, by crediting their capital accounts.

(C) Goodwill paid privately — this matches (I) no entry passed. When the new partner pays the old partners directly, the money never passes through the firm, so no entry is made.

(D) Hidden goodwill — this matches (II) inferred from the capital arrangement. When the value is not given, it is worked out from the capitals and the new partner’s share.

NCERT (2026-27 edition):
When the new partner does not bring goodwill in cash, partly or fully – “… When goodwill exists in the books : Goodwill appearing in the books will be written-off by debiting old partners ‘capital accounts in their old profit sharing ratio.”

NCERT (2026-27 edition):
When the new Partner brings goodwill in cash – “… The amount of premium brought in by the new partner is shared by the existing partners in their ratio of sacrifice. If this amount is paid to the old partners directly (privately) by the new partner, no entry is passed in the books of the firm.”

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.”