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Why heirs of ...

Question

Why heirs of a retiring / decreased partner are entitled to a share of goodwill of the firms?

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Solution

The heirs of a retiring/deceased partner are entitled to a share of goodwill of the firm as after the retirement/death of a partner, the fruits of the collective past performances and reputation will be shared only by the continuing partners. Hence, the remaining partners compensate the retiring or the deceased partner by entitling him/her a share of the firm's goodwill.

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Why a retiring/deceased partner is entitled to a share of goodwill of the firm?

Q. Short answer type question:
Why heirs of deceased partner are entitled to share of goodwill of the firm?

Q. State whether the following statements are true or false :

Retiring partner is entitled to his share of goodwill.

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For which share of goodwill a partner is entitled at the time of retirement?

Q. A,B and C are three partners in a partnership firm sharing profit and loss equally. C retires from the firm on 31st March.His share of profit is purchased by A and B in the ratio of 2:1.If at the time of retirement, value of the goodwill of the firm is valued at Rs.54,000, and the partners decides to pay goodwill to the retiring partner, what will be accounting treatment?

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