Assertion (A): At the time o admission of a partner, the value of the Goodwill of the firm is determined because the new partner compensates the sacrificing partner or partners.
Assertion (A): At the time o admission of a partner, the value of the Goodwill of the firm is determined because the new partner compensates the sacrificing partner or partners.
Reason (R): Goodwill of the firm is valued at the time of admission of a partner because the new partner is the Gaining Partner and he will compensate the Sacrificing partner or partners.
In the context of above two statements, which of the following is correct?
a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of Assertion (A).
b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).
c) Only Assertion (A) is correct
d) Both Assertion (A) and Reason (R) are incorrect.
Anurag Pathak Changed status to publish June 1, 2023
Ans – b)
Explanation:- The value of the goodwill of the firm is calculated as goodwill is calculated as the estimated future profits of the firm that firm would earn through goodwill.
Once the new partner is admitted, he would get a part of this profit. but he is not entitled to it. it belongs to the old partners. thus he would bring premium of goodwill equal to the amount he would get in the future. this part is credited to the sacrificing partner in sacrificing ratio.
Anurag Pathak Changed status to publish June 1, 2023
