Question

State Whether the following Statement is True or False:

If the incoming partner brings the amount of goodwill in cash then the same is distributed among the old partners in their new profit sharing ratio.

Answer 1

The statement is false.

Explanation:

• The premium for goodwill brought in cash by an incoming partner is distributed among the old partners in their Sacrificing Ratio, not their new profit-sharing ratio.
• This amount serves as personal compensation to the existing partners who are giving up a portion of their future profit share in favour of the new partner.