Question

If some goodwill already exists in the books and the new partner brings in his share of goodwill in cash, how will you deal with existing amount of goodwill ?

Answer 1

In case when goodwill already exists in the books of a firm before the admission of a new partner, the amount of such goodwill will be written off by transfering it to old partner's capital account in their old profit sharing ratio.

The following will be the entry in this regard:

$\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{LF}& \text{Amt.(Dr)}& \text{Amt.(Cr)}\\ & \text{Old Partners Capital A/c}\text{Dr}& & & \\ & \text{To Goodwill A/c}& & & \\ & \text{(Goodwill written off among old partners}& & & \\ & \text{in their old profit sharing ratio)}& & & \end{array}$