Question

0.22 Effects of adjustment of goodwill
written off in final accounts are
A. Profit & Loss A/c debit and Balance
Sheet liabilities side
B. Capital A/c debit and Balance Sheet
liabilities side
c. Profit & Loss A/c debit and less from
goodwill in Balance Sheet assets side
D. Trading A/c credit and less from
furniture in Balance Sheet assets side​

Answer 1

Answer:

option C is. correct in thisvqiestion

Answer 2

Answer:

When goodwill is written off, goodwill A/c is debited to all partner capital accounts in a new profit-sharing ratio

Explanation:

When goodwill is written off, all partner capital accounts are debited by the new profit-sharing ratio. - True

The increase in goodwill's value will be credited to all partner equity accounts, including those of retired or deceased partners if it is decided that goodwill should not be restrained and should instead be represented on the balance sheet of the rebuilt firm. After that, it will be written off, with the total value credited to the goodwill account and the remaining partners debited according to their new profit-sharing ratio.

Accounting for Goodwill in Financial Statements

Since goodwill is an intangible asset, it is listed as a noncurrent asset on the balance sheet. Noncurrent assets are long-term investments similar to fixed assets like property, plants, and equipment. The Financial Accounting Standards Board has established criteria for calculating a company's goodwill value.

Let's imagine that a fictional apparel retailer named Teal Orchid has $750,000 in identifiable assets, which include the current market value of its real estate, inventory, cash, and accounts receivable. The clothing retailer is bought by Samantha & Steve Fashions, a more significant business, for $850,000. Why? In the region where it conducts business, Teal Orchid has a solid reputation and recognition for its brand. The purchasing company anticipates that using the Teal Orchid brand name to increase earnings over time will enable it to eventually recoup the extra $100,000 it spent over the fixed asset value of the business.

A departing partner's capital account is deducted if goodwill is written down.

• The company's intangible asset is its goodwill. In the event of a partnership firm, they divide the capital contribution proportionally.
• As a result, when one of the partners retires, they divide the goodwill, and when goodwill is written off when a partner retires, the goodwill account is deducted from the accounts of all partners.

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