At the time of retirement of a partner, compensation paid to sacrificing partner as Goodwill is recorded by passing the following Journal entry:
At the time of retirement of a partner, compensation paid to sacrificing partner as Goodwill is recorded by passing the following Journal entry:
a)
Goodwill A/c Dr.
To Retiring Partner’s Capital A/c
b)
Gaining Partners Capital A/c Dr.
To Retiring Partner’s Capital A/c
c)
Gaining Partner’s Capital A/cs Dr.
To Goodwill A/c
d)
Retiring Partner’s Capital A/c Dr.
To Gaining Partner’s Capital A/cs
Anurag Pathak Changed status to publish July 2, 2023
Ans – b)
Explanation:-
The retiring partner sacrifices his share to the remaining partners. The remaining partners gain his share in the gaining ratio. As goodwill is part of future expected profits.
The retiring partners’ share in the goodwill is compensated by the remaining partners in their gaining ratio.
Anurag Pathak Changed status to publish July 2, 2023
