In what way can goodwill be written off in a partnership business?
-
Using the partners' profit and loss sharing ratio
- By neglecting the ratio of partners capital contributions
- By sharing it unequally among the partners where no agreement exists
- By sharing it among the active partners only
The correct answer is: A
Explanation
To put it in other words, if we want to carry forward existing Goodwill in the books, then the value of existing Goodwill should be deducted from the new value of Goodwill. This excess value of Goodwill must be credited to the existing partners capital accounts in their profit sharing ratio.