Question

At the time of change in profit sharing ratio, existing goodwill is written off among the partners in:

• A. Sacrificing Ratio
• B. Equal Ratio
• C. Old Ratio
• D. Gaining Ratio

Hint:

For reconstitution of a firm, remember: - **Existing goodwill** → written off in **old ratio** - **New goodwill** (due to change) → adjusted via **sacrificing or gaining ratio**

Answer 1

The Correct Option is C

Step 1: Understand the context.
When there is a change in the profit-sharing ratio among existing partners (due to admission, retirement, or reconstitution), goodwill already appearing in the books (i.e., existing goodwill) needs to be adjusted. Step 2: Treatment of existing goodwill.
Existing goodwill is a past accumulated benefit and must be written off among the old partners based on their old profit-sharing ratio to maintain fairness. Step 3: Rule application.
The correct rule is: \[ \text{Existing goodwill is written off in the old profit-sharing ratio.} \]