Rohan, Bharti, and Leela are partners. Upon Rohan's retirement, it is noted that goodwill already appears in the balance sheet valued at . This existing goodwill must be written off by:
- ABy debiting all partners' capital accounts in their old profit-sharing ratio.
- BBy debiting remaining partners' capital accounts in their new profit sharing ratio.
- CBy debiting retiring partners' capital accounts from his share of goodwill.
- DBy debiting the retiring partners' current account from his share of goodwill.
Solution & Step-by-step Explanation
According to accounting standards, any historical goodwill already recorded in the books (appearing in the Balance Sheet) at the time of a partner's retirement or admission must be written off immediately.This is done by debiting the Capital Accounts of all the partners (including the retiring partner) in their old profit-sharing ratio, and crediting the Goodwill Account to close it.