Multiple choice

A, B and C are partners sharing profits in the ratio of 3 : 2 : 1. B retires and goodwill of the firm is fixed at Rs. 1,80,000. No Goodwill A/c appears in the books of the firm. A and C decide to share profits in the ratio of 3 : 1. B's share of goodwill will be adjusted in the capital A/cs of A and C in

  1. profit sharing

  2. gaining ratio

  3. sacrificing ratio

  4. old ratio
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When a partner retires, the remaining partners gain a portion of the retiring partner's share. The goodwill adjustment is made based on the ratio in which the remaining partners gain, which is the gaining ratio.

AI explanation

When a partner retires, the continuing partners adjust the retiring partner's goodwill based on the advantage they gain. The continuing partners, A and C, calculate their new shares and subtract their old shares to find their gaining ratio. Because this ratio represents their proportionate benefit in future profits, the goodwill adjustment is made in the gaining ratio. The correct adjustment is made in the gaining ratio.

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