Question

How is goodwill adjusted in the books of the firm when a partner retired from the partnership or dies? ​

Answer 1

Explanation:

At the time of retirement of partner from a partnership firm, there are some necessary adjustments which need to be done like revision of profit sharing ratio, revaluation of assets and liabilities, adjustment for goodwill etc.

If goodwill is raised on the retirement of a partner, it is credited to all partner's in the old ratio and when it is write-off, it is debited to remaining partners in new ratio.

Journal entries for the above are as follows: 

1. Goodwill raised

Goodwill A/c                Dr.

       To All partners capital A/c (old ratio)

2. goodwill write-off

Remaining partners capital A/c  (new ratio )     Dr.

       To Goodwill A/c

Answer 2

Answer:

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