Question

Explain the treatment of goodwill in the books of a firm on the admission of a new Partner when goodwill already appears in the Balance sheet at its full value and the new partner brings his share of good will in cash.

Answer 1

By following accounting standard -10, the existing goodwill (i.e. goodwill appearing in the Balance Sheet ) is written off to the old partners Capital a/c in their old profit sharing ratio.

Old partners capital A/c  Dr. .....

To Goodwill A/c      

[Being the existing g/w written off in the old ratio.]