Question : How is goodwill recorded when a partner retires?
Option 1: Remaining Partner’s Capital A/cs Dr. (In Gaining Ratio)
To Retiring Partner’s Capital A/c (with his share of goodwill)
Option 2: Remaining Partner’s Capital A/cs Dr. (In New Ratio)
To Retiring Partner’s Capital A/c (with his share of goodwill)
Option 3: Goodwill A/c Dr.
To Retiring Partner’s Capital A/c (with his share)
Option 4: Goodwill A/c Dr.
To All Partner’s Capital A/cs (In Old Ratio)
Correct Answer: Remaining Partner’s Capital A/cs Dr. (In Gaining Ratio)
To Retiring Partner’s Capital A/c (with his share of goodwill)
Solution : According to the partnership deed's guidelines, the company's goodwill is assessed. His share of the goodwill is credited to the capital account of the retiring partner, and the remaining partners' capital accounts are debited in proportion to their share of the gain.
Hence the correct answer is option 1.
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| Liabilities | Rs. | Assets | Rs. |
| Provision for |
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