Tag: payment of firm's debts and separate debts, realisation of assets and liabilities

Questions Related to payment of firm's debts and separate debts, realisation of assets and liabilities

In which of the following case the need for the valuation of goodwill in a firm may arise?
(I) Admission of new partner
(II) While changing profit sharing ratio
(III) Retirement of partner
(IV) Death of partner
Select the correct answer from the options given below-

book keeping and accountancy dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities meaning of dissolution of partnership firm

  1. (I) & (III) only

  2. (I), (III) & (IV)

  3. (I), (II) & (III) only

  4. All (I) to (IV)

Show answer
Correct Option: D
Explanation:

In all these cases one partner sacrifice and the other partner gain. Gaining partner must compensate the sacrificing partner by paying the proportionate amount of goodwill. Gaining partner should pay the sacrificing partner that share of goodwill which is equal to the share gained by him. Valuation is done to calculate that share.