$A, B, C$ and $D$ were partners in a firm sharing profits in the ratio of $4 : 3 : 2 : 1$ . On $1^{s t}$ January,2015, they admitted $E$ as a new partner for $1 / 10 t h$ share in the profits. $E$ brought $R s . 10, 000$ for his share of goodwill premium which was correctly recorded in the books by the accountant. The accountant showed goodwill at $R s . 1, 00, 000$ in the books. Was the accountant correct in doing so? Give reason in support of your answer.

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Solution

The accountant is not correct.
Reason: It is a self-generated goodwill and only purchased goodwill is recorded in the books of accounts as per AS-26.

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The accountant is not correct.Reason: It is a self-generated goodwill and only purchased goodwill is recorded in the books of accounts as per AS-26.

The accountant is not correct.
Reason: It is a self-generated goodwill and only purchased goodwill is recorded in the books of accounts as per AS-26.