Question

When is goodwill account raised in the books of the firm? (Answer in one sentence)

Answer 1

WHEN NEW PARTNER IS UNABLE TO CONTRIBUTE CASH TOWARDS HIS SHAE IN GOODWILL . THE GOODWILL AC IS RAISED TO GIVE BENEFITS OF GOODWILL TO EXISTING PARTNER IN A FIRM.

Answer 2

Only when any value of money is paid for is goodwill documented in the accounts. This is why it is also reported in the books when it is purchased.

• In the case of Partnership Reconstitution, whenever there is an increase in a partner's profit share, it means that such partner acquires a share of profit from other partner or partners by acquiring its share.
• The partner whose share of income rises should compensate the partner or partners whose share is reduced, i.e. winning partners should compensate for the sacrifice.
• This reward owed by the winning partner is known as Goodwill or Premium for Goodwill for his benefit to the sacrificing partner or partners.