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Question
State True or False with reason.
Cash/ Bank Account is credited when goodwill is withdrawn by the old partners.
Options
True
False
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Solution
This statement is True.
Reason:
When a new partner brings his share of goodwill, old partners have the right to withdraw it in cash. Therefore, when old partners withdraw the amount of goodwill, cash goes out of the firm and not goodwill. Hence Cash/Bank A/c is credited.
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| Balance Sheet as at 31st March,2021 | |||||
| Liabilities | Amount (₹) | Assets | Amount (₹) | ||
| Sundry Creditors | 56,500 | Cash | 1,17,300 | ||
| Bank Overdraft | 61,500 | Debtors | 38,000 | ||
| Workmen’s Compensation Reserve | 32,000 | Less: Provision For Doubtful Debts | (2,300) | 35,700 | |
| Capitals: | Inventories | 1,34,000 | |||
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| Goodwill | 63,000 | ||||
| 12,00,000 | 12,00,000 | ||||
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