Multiple choice

A,B & C sharing profit & losses in the ratio of $3:2:1$. A retired and Goodwill of the firm is to be valued at $Rs.24,000$. What will be the treatment for goodwill?

  1. Credited to Revaluation A/c at $Rs.24,000$

  2. Adjusted through Partners Capital A/c's in gaining/sacrificing ratio.
  3. Only A's Capital A/c credited with $Rs.12,000$
  4. Only A's Capital account credited with $Rs.24,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When a partner retires, the goodwill of the firm is valued and the retiring partner's share is credited to them, while the remaining partners are debited in their gaining ratio. This is an adjustment through the partners' capital accounts.

AI explanation

According to the partnership accounting standard, when goodwill is not to be raised in the books, it must be adjusted directly through the partners' capital accounts. Goodwill is adjusted using the gaining and sacrificing ratio when a partner retires. Therefore, the treatment for the goodwill of Rs. 24,000 is to adjust it through the partners' capital accounts in their gaining or sacrificing ratio.

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