Question

State the need for treatment of goodwill on admission of a partner.​

Answer 1

Answer:

When a new partner is admitted, his share in future profits of the firm is equal to the sacrifice of profit by an existing partner or partners of the firm. The amount he pays to compensate this sacrifice, is in the form of goodwill. Therefore, it is important to treat goodwill at the time of admission of a partner

Explanation:

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Answer 2

When a new partner is admitted, his share in future profits of the firm is equal to the sacrifice of profit by an existing partner or partners of the firm. The amount he pays to compensate for this sacrifice is in the form of goodwill. Therefore, it is important to treat goodwill at the time of admission of a partner.