Question

If the incoming partner brings the amount of goodwill in cash and balance exists in goodwill account, then this goodwill account is written off among the old partners in ______.

Options

• The new profit sharing ratio

• The old profit sharing ratio

• The sacrificing ratio

• The gaining ratio

Answer 1

If the incoming partner brings the amount of goodwill in cash and balance exists in goodwill account, then this goodwill account is written off among the old partners in the old profit sharing ratio.

Explanation:

According to accounting standards (AS-26), this existing book balance must be completely written off by debiting the old partners' capital accounts in their old profit-sharing ratio. This treatment remains the same regardless of whether the incoming partner brings their premium for goodwill in cash or not.