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When Goodwill Exist in the Business

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Question

State 'True' or 'False'

When goodwill is written off, goodwill amount is debited.

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Solution

False

Explanation: If old (or existing) goodwill appears in the books of a firm, then at first, it is written off by debiting the Old Partners’ Capital Accounts in their old profit sharing ratio and crediting the Goodwill Account.

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If goodwill is written off retiring partner’s capital account is debited.

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