Gobind, Hari and Pratap are partners. On the retirement of Gobind, goodwill already appears in the Balance Sheet at . This existing goodwill will be written-off by:
- Adebiting all partners' capital accounts in their old profit sharing ratio.
- Bdebiting remaining partners' capital accounts in their new profit sharing ratio.
- Cdebiting retiring partners' capital accounts from his share of goodwill
- Ddebiting retiring partners' capital accounts in gaining ratio
Solution & Step-by-step Explanation
When a partner retires or passes away, any existing goodwill book value appearing in the balance sheet of the firm must be written off immediately. This is done by debiting all partners' capital accounts (including the retiring partner) in their old profit-sharing ratio and crediting the Goodwill Account.