Financial Accounting

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Meekha (Querist)

05 February 2009 Sir, in case of goodwill, where the book value is less than the face value, ie30000 is the book value and 50000 is the revalued value, and there are k,l, and m as partners sharing 5:3:2 p/l, how is it accounted where the goodwill is to be written off?

On the retirement of L, N is admitted as new partner.

Instead of writing off 20000 among old partners, how is it that they have illustrated by writing off 50000 itself among k,m, and n?

similarly they have illustrated another sum having book value 40000 and full value 56800, and having A, B, C as partners, and A retires and 56800 is shared between B and C in their ratio. can you please explain me the concept behind this?

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)

05 February 2009 Entry :

Goodwill Dr. 20000
To K 10000
To L 6000
To M 4000

Goodwill is the name earned by the Firm while they are doing business. There are two methods of sharing of goodwill. First one is in their profit sharing ratio which is as per above.

Second method is it will be shared by only working partners or partners who have contributed more.

The entry is
Good will DR
To B
To C

Meekha

Meekha (Querist)

08 February 2009 thank you sir

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