Question : When goodwill existing in the books is written off at the time of admission of a partner it is transferred to Partners' Capital Accounts in their
Option 1: Old profit-sharing ratio
Option 2: New profit-sharing ratio
Option 3: Sacrificing ratio
Option 4: Gaining ratio
Correct Answer: Old profit-sharing ratio
Solution :
Answer =
Old profit-sharing ratio
If a new partner brings his share of goodwill in cash, and if the Goodwill Account already appears in the books of the firm, first of all, the existing Goodwill Account will have to be written off. For this purpose old Partner's Capital Accounts are debited in their old profit-sharing ratio and the Goodwill Account is credited.
Hence, the correct option is 1.
