Question

Retiring Partners share of goodwill is debited to remaining partners in their _________.

• A. capital ratio
• B. new profit sharing ratio
• C. old profit sharing ratio
• D. gaining ratio

Answer 1

The correct option is D gaining ratio

At the time of retirement of partner, reconstitution takes place in which Assets and liabilities are revalued, profit sharing ratio is revised, goodwill is raised etc. Remaining partners share the profit of retiring partner in future therefore, at the time of retirement of partner remaining partner has to compensate to retiring partner. Therefore, retiring partners share of goodwill is debited to remaining partner in their gaining ratio.