Question

Complete the following sentence.

"If goodwill already appears in the books, it will be written off by debiting all partner's capital account in their ______ ratio"?

Options

• Old profit sharing ratio

• New profit sharing ratio

• Sacrificing ratio

• None of these

Answer 1

"If goodwill already appears in the books, it will be written off by debiting all partner's capital account in their Old profit sharing ratio".

Explanation:

The essential concept is that the gaining partner(s) compensates the sacrificing partner to the amount that their gain compensates them for their respective share of goodwill. If goodwill has already been recorded in the books, it will be wiped off by debiting all partners' capital accounts in their previous profit-sharing ratio.