Question

On the retirement of a partner, the whole goodwill amount is credited to the account of _________.

• A. all partners including retiring partner
• B. only retiring partner
• C. only remaining partners
• D. none of these

Answer 1

The correct option is A all partners including retiring partner

At the time of retirement of a partner from partnership firm, reconstitution of partnership takes place. In this reconstitution there is revision of profit sharing ratio among partners, determination of gaining and sacrificing ratio, revaluation of assets and liabilities, adjustments for goodwill and joint life policy etc. takes place. All these adjustments takes place and finally profits or losses are distributed among old partners in old profit sharing ratio.