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Hidden Goodwill

State 'True' ...

Question

State 'True' or 'False'

The goodwill brought in by a new partner is shared by the old partners.

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Solution

True

Explanation: Goodwill brought in by a new partner is shared by the old partners in their sacrificing ratio. At the time of admission, the new partner acquires the right to share future profits; so, in exchange, he/she should compensate the sacrificing partners. Such compensation is known as premium for goodwill.

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Similar questions

Q. State 'True' or 'False'

The goodwill brought in by the new partner is shared by all partners.

Q. Share of goodwill brought in cash by the new partner is shared by the old partners _________.

Q. Goodwill brought in by incoming partner in cash for joining in a partnership firm is taken away by the old partners in their new profit sharing ratio.

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. State whether the following statements are true or false :

On the death of a partner, his share in the goodwill is divided equally among continuing partners.

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