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Question
State True or False with reason.
When goodwill is paid privately to the partners, it is not recorded in the books.
Options
True
False
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Solution
This statement is True.
Reason:
When goodwill is paid privately to the partners, by a newly admitted person, then in such case no transaction takes place in the business and firm as such is not all benefited. Hence it is not recorded in the books of accounts.
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| Year | (₹) | |
| 2020-21 | Loss | 20,000 |
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- The formula to calculate goodwill by the Average Profit Method.
- The value of self-generated goodwill of the firm.
- Danish’s capital contribution.
