Goodwill is recognized in partnership accounts when
- The business makes a huge profit
- The business has good customer relationship
- A partner is dormant
-
A new partner is admitted
The correct answer is: D
Explanation
Goodwill is recorded in the books only when some consideration in money or money’s worth is paid for it. Thus, in the context of a partnership firm, the need for valuation of goodwill arises at the time of:
- Change in the profit sharing ratio amongst the existing partners
- Admission of a new partner
- The retirement of a partner
- Death of a partner
- Dissolution of a firm where business is sold as going concern.
- Amalgamation of partnership firms