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Question
For which of the following situations, the old profit sharing ratio of partners is used at the time of admission of a new partner?
Options
When a new partner brings only a part of his share of goodwill.
When a new partner is not able to bring his share of goodwill.
When at the time of admission, goodwill already appears on the balance sheet.
When a new partner brings his share of goodwill in cash.
MCQ
Solution
When at the time of admission, goodwill already appears on the balance sheet.
Explanation:
When a new partner is admitted while goodwill already exists in the balance sheet, the old profit sharing ratio of the partners is applied. In other instances, the new partner is only required to compensate according to the gaining ratio.
shaalaa.com
Admission of a Partner - Treatment of Goodwill
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