Question

Assertion (A): On retirement of a partner, if the retiring partner is paid in excess of the total amount due to him, such an excess is treated as his share of goodwill.

Reason (R): Retiring partner’s share of goodwill is recorded by debiting goodwill account and crediting retiring partner’s capital account.

In the context of the above two statements, which of the following is correct?

Options

• Both (A) and (R) are correct and (R) is the correct explanation of (A).

• Both (A) and (R) are correct but (R) is not the correct explanation of (A).

• Only (A) is correct.

• Both (A) and (R) are wrong.

Answer 1

Only (A) is correct.