During the course of an audit, the auditor stumbled upon a balance of Rs.12,500 in the Goodwill A/c and ascertained that it had not been written off for a long period. What may the auditor do with it?

Advise the concern to write it off.

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Hide it from the management.

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Insist that it be written off the same year.

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Recommend to the concern that it be written off over a period of five years.

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Solution

The correct option is A Advise the concern to write it off.
Auditor cannot force/ insist but provide with suggestions and advise the auditee on any action to be taken.
In the given question, he can only advise to write off the balance.Hiding the facts from management is not a right thing to do.
Note: Auditor can never provide recommendations.

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Q. On retirement of a partner, goodwill appears in the balance sheet , it will be written-off by debiting the capital accounts of partners.

Q. Pass necessary Journal entries to record the following unrecorded assets and liabilities in the books of Paras and Priya:
(a) There was an old furniture in the firm which had been written off completely in the books. This was sold for Rs. 3,000.
(b) Ashish, an old customer whose account for Rs. 1,000 was written off as bad in the previous year, paid 60%, of the amount.
(c) Para agreed to takeover the firm's goodwill (not recorded in the book of the firm), at a valuation of Rs. 30,000.
(d) There was an old typewriter which had been written off completely from the books. It was estimated to realise Rs. 400. It was taken by priya at an estimate price less 25%

Record necessary journal entries to record the following unrecorded assets and liabilities in the books of Paras and Priya:

1. There was an old furniture in the firm which had been written-off completely in the books. This was sold for Rs 3,000,

2. Ashish, an old customer whose Account for Rs 1,000 was written-off as bad in the previous year, paid 60%, of the amount,

3. Paras agreed to take over the firm’s goodwill (not recorded in the books of the firm), at a valuation of Rs 30,000,

4. There was an old typewriter which had been written-off completely from the books. It was estimated to realize Rs 400. It was taken away by Priya at an estimated price less 25%,

5. There were 100 shares of Rs 10 each in Star Limited acquired at a cost of Rs 2,000 which had been written-off completely from the books. These shares are valued @ Rs 6 each and divided among the partners in their profit sharing ratio.

If at the time of retirement of a partner, goodwill appears in the balance sheet of the firm, it will be written-off by debiting the capital accounts of ______

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