Question

Select the most appropriate answer from the alternatives given below :

If the goodwill is raised to the extent of retiring partners share ___________ account is to be debited.
a) cash
b) goodwill
c) all partner’s capital
d) retiring partners capital

Answer 1

If the goodwill is raised to the extent of retiring partner’s share, goodwill account is to be debited.

Explanation: If the goodwill is raised to the extent of the retiring partner’s share, Goodwill Account is to be debited. It means that the continuing partners have not compensated their share in favour of the retiring partner; so, there is no need to calculate gaining ratio. Still, the retiring partner’s share of goodwill is to be paid, due to which the goodwill account is to be debited.