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Question
On retirement of a partner, goodwill will be credited to the Capital Account of ______.
Options
Retiring Partner
Remaining Partners
All Partners
None of the Above
MCQ
Fill in the Blanks
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Solution
On retirement of a partner, goodwill will be credited to the Capital Account of Retiring Partner.
Explanation:
Goodwill is the retiring partner’s share in the firm’s reputation and profits earned over time. At retirement, their share of goodwill is credited to their Capital Account as compensation. The continuing partners adjust this through their gaining ratio, debiting their capital/current accounts. This ensures the retiring partner is fairly compensated for their share in the firm’s goodwill.
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