Goodwill Given in the old Balance Sheet will be:a)Written off by the Sacrificing partnersb)Distributed by Gainer partnersc)Credited to old Partners Capital accountsd)Written off by the old partnersCorrect answer is option 'D'. Can you explain this answer?

Question

Answer

Goodwill given in the old balance sheet will be created to old partners capital a/c in their old profit sharing ratio.

Answer

Yes written off by old partner in there old profit sharing ratio

Answer

Goodwill given in balance sheet are called purchased goodwill and written off in existing partners capital account,In old ratio excluding incoming partner

Answer

Old goodwill will be created to old partners capital a/c in their old profit sharing ratio.

Answer

Explanation:

Goodwill represents the value of a business's reputation, customer base, and other intangible assets. When there is a change in the partnership, the existing goodwill in the old balance sheet needs to be accounted for. The correct answer is option 'D', which states that the old partners will write off the goodwill.

Here is a detailed explanation of why the old partners write off the goodwill:

1. Nature of Goodwill:
Goodwill is an intangible asset that represents the reputation, brand value, and customer loyalty of a business. It is not a physical asset that can be distributed or credited directly.

2. Change in Partnership:
When there is a change in the partnership, such as retirement or admission of a new partner, the existing partnership is dissolved, and a new partnership is formed. As a result, the old balance sheet needs to be adjusted to reflect the changes.

3. Treatment of Goodwill:
Goodwill is typically created when a partnership is formed or when there is a change in ownership. In the old balance sheet, goodwill is recorded as an asset. However, when there is a change in partnership, the goodwill cannot be distributed or transferred to the new partners.

4. Writing Off Goodwill:
To account for the change in partnership, the old partners need to write off the goodwill from the old balance sheet. This means that the value of the goodwill is deducted from the old partners' capital accounts.

5. Impact on Old Partners:
By writing off the goodwill, the old partners are essentially giving up their claim on the intangible asset. This reduces their capital and reflects the fact that the goodwill is no longer a part of the partnership.

6. Allocation of Goodwill:
If the partnership agreement allows for the allocation of goodwill among the partners, it can be distributed among the old partners based on their profit-sharing ratio. However, in this scenario, the question specifically states that the goodwill is written off by the old partners.

In summary, when there is a change in partnership, the existing goodwill in the old balance sheet is written off by the old partners. This is done to adjust the capital accounts and reflect the change in partnership.

Answer

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