Question : On retirement of a partner,
Option 1: Goodwill is brought up to new value and recorded as assets
Option 2: Goodwill is brought up to new value and then written off
Option 3: Goodwill is adjusted between partners through capital account
Option 4: Goodwill is raised to extent of retiring partner's share
Correct Answer: Goodwill is adjusted between partners through capital account
Solution : Answer (3) Goodwill is adjusted between partners through a capital account.
On the retirement of a partner, goodwill is adjusted between partners through capital accounts. This means that any increase or decrease in the value of goodwill is distributed among the remaining partners in their respective capital accounts, ensuring that the retiring partner's share of goodwill is appropriately accounted for in the partnership.
Hence, the correct option is 3.
