Question

Gobind, Hari and Pratap are partners. On the retirement of Gobind, the goodwill already appears on the Balance Sheet at Rs. 24,000. The goodwill will be written off ______ 

Options

• By debiting all partners' capital accounts in their old profit sharing ratio.

• By debiting the remaining partners' capital accounts in their new profit sharing ratio.

• By debiting retiring partners' capital accounts from his share of goodwill.

• None of these

Answer 1

Gobind, Hari and Pratap are partners. On the retirement of Gobind, the goodwill already appears on the Balance Sheet at Rs. 24,000. The goodwill will be written off By debiting retiring partners' capital accounts from his share of goodwill.

Explanation:

The value of goodwill is increased to the extent of the retired/deceased partner's share and promptly written off: In this situation, by debiting the goodwill account with the proportionate amount and crediting only the retired/deceased partner's capital account, the goodwill account is only boosted to the extent of the retired/deceased partner's share. The surviving partners' capital accounts are then debited in their gaining ratio, and the goodwill account is credited to write it down.