Question

On retirement of a partner, goodwill will be credited to the capital account of:

• A. Retiring partner
• B. Remaining partners
• C. All partners
• D. None of these

Hint:

In partnership accounting, always allocate goodwill to the retiring partner to ensure fair compensation for their contributions to the firm's reputation.

Answer 1

The Correct Option is A

Step 1: Understanding the treatment of goodwill.
On the retirement of a partner, goodwill is credited to the retiring partner's capital account because it represents the retiring partner's share of the firm's reputation and intangible value accumulated during their tenure.

Step 2: Identifying the correct account to credit.
The retiring partner is entitled to their share of goodwill as per the partnership agreement or mutual understanding among the partners. This amount is credited directly to their capital account.