Question

Short answer type question:
Why the value of goodwill need to be determined on retirement or death of a partner?

Answer 1

In case of a retirement or death of a partner, the continuing partner will gain in terms of profit sharing ratio. Therefore continuing partner are required to compensate the retiring partner or heirs of deceased partner with his share of goodwill. For this purpose, goodwill need to be determined on the date of the retirement or death of a partner and adjusted through the capital accounts of a partner.