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Hidden Goodwill

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Question

State 'True' or 'False'

On admission of a partner, the amount of goodwill brought in cash is credited to goodwill account.

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Solution

True

Explanation: As per Accounting Standard 26 issued by The Institute of Chartered Accountants of India (ICAI), if any partner brings in a certain amount of goodwill in cash, then cash/bank account is debited and goodwill account is credited. Such premium is distributed among the sacrificing partners in their sacrificing ratio.

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Q. When required amount for premium for goodwill is not brought in by new partner, goodwill account is raised in the books of the firm by debiting goodwill account and crediting partners capital account in old profit sharing ratio and written off in ______ if it agreed not show goodwill in the books of the firm OR ALTERNATIVELY premium for goodwill should be adjusted through partners capital account by debiting new partners share of goodwill to his account and crediting old partners capital accounts in _________.

Q. When a goodwill account is raised at the time of admission of a new partner then credit is given to the old partners in their:

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

Q. When a new partner brings cash for goodwill, the amount is credited to the __________ .

Q. At the time of admission when goodwill account is not being opened in the books of account, credit is given to the old partner in what ratio?

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