Question

accounted in the books only when consideration in money or money's worth has been paid for it.]
40. A, B, C and D were partners in a firm sharing profits in the ratio of 4 : 3:2:1. On 1st January, 2015,
they admitted E as a new partner for 1/10 share in the profits. E brought * 10,000 for his share
of goodwill premium which was correctly recorded in the books by the accountant. The accountant
showed goodwill at * 1,00,000 in the books. Was the accountant correct in doing so? Give reason in
support of your answer.
(Delhi 2015)
(Hint: No, the accountant is not correct. Reason: It is a self-generated goodwill and only purchased
goodwill is accounted in the books of account as per AS-26.]​

Answer 1

Answer:

accounted in the books only when consideration in money or money's worth has been paid for it.]

40. A, B, C and D were partners in a firm sharing profits in the ratio of 4 : 3:2:1. On 1st January, 2015,

they admitted E as a new partner for 1/10 share in the profits. E brought * 10,000 for his share

of goodwill premium which was correctly recorded in the books by the accountant. The accountant

showed goodwill at * 1,00,000 in the books. Was the accountant correct in doing so? Give reason in

support of your answer.

(Delhi 2015)

(Hint: No, the accountant is not correct. Reason: It is a self-generated goodwill and only purchased

goodwill is accounted in the books of account as per AS-26.]