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Question
State 'True' or 'False'
On admission of a partner, the amount of goodwill brought in cash is credited to goodwill account.
Options
True
False
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Solution
True
Explanation: As per Accounting Standard 26 issued by The Institute of Chartered Accountants of India (ICAI), if any partner brings in a certain amount of goodwill in cash, then cash/bank account is debited and goodwill account is credited. Such premium is distributed among the sacrificing partners in their sacrificing ratio.
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- Danish’s capital is to be equal to `1/4` of Anish’s capital determined on 1st April, 2023, after the goodwill compensation has been taken into account.
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- The value of self-generated goodwill of the firm.
- Danish’s capital contribution.
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P: The normal profits of a similar firm in the industry.
Q: The average profits of the firm.
R: The number of years purchase.
S: The actual capital employed in the business.
