Accountancy Part AAdmission of a Partner

A partner is admitted and the following steps are to be followed whil…

A partner is admitted and the following steps are to be followed while calculating his share of goodwill. Arrange them in a sequence:

(A) Calculate new partner's share of goodwill

(B) Calculate total capital of the newly constituted firm

(D) Calculate goodwill of the firm

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → (B), (C), (D), (A)

Where the value of goodwill is not given, it is worked out from the new partner’s capital and share (hidden goodwill). The steps run in this order:

(B) Calculate total capital of the newly constituted firm
(C) Calculate actual capital of all the partners
(D) Calculate goodwill of the firm
(A) Calculate new partner’s share of goodwill

NCERT (2026-27 edition):
Hidden Goodwill – “… Based on the amount brought in by C and his share in profit, the total capital of the newly constituted firm works out to be Rs.1,80,000 (Rs. 60,000 × 3). But the actual total capital of A, B and C works out as Rs. 1,50,000 (Rs. 45,000 + Rs. 45,000 + Rs. 60,000). Hence, it can be inferred that the difference is on account of goodwill i.e., Rs. 30,000 (Rs. 1,80,000 – Rs. 1,50,000). Which is to be shared equally (old ratio) by A and B. This shall raise their capital accounts to Rs. 60,000 each and total capital of the firm to Rs. 1,80,000. In this, C’s Current account will be debited by Rs. 10,000 (his share of goodwill) and A and B’s Capital accounts credited by Rs. 5,000 each.”