Question

The New Partnership Firm writes off
goodwill in​

Answer 1

Answer:

When a new partner is admitted a revaluation account is prepared to account for appreciation and depreciation in the value of assets and liabilities. The net gain or loss is credited or debited to the existing partner’s capital or current account. The new partner’s capital or current account is not affected. Why should that be? The new partner has no right on the gain or loss arising out of change in assets. Goodwill is built up by the old partners capital. It is dependent on the earning capacity of the business which has so long been managed by the old partners. Hence the value of goodwill is written off and transferred to the old partner’s account in the old profit sharing ratio. The new partner has no right on the goodwill.

I have tried to make my answer conceptual.