Why is the deceased partner’s share of the firm’s goodwill added to the amount due to them?

Correct answer: To compensate them fairly for their share in the firm’s goodwill

Goodwill represents the firm’s reputation, customer loyalty and capacity to earn higher future profits. Since the deceased partner contributed to building the firm, they are entitled to their share of goodwill according to the profit-sharing ratio. This amount is credited to the partner’s Capital or Current Account and included in the amount payable to the legal representatives. Therefore, option A is correct; the adjustment is not made to increase routine expenses, reduce tax, or directly increase sales. Exam tip: While calculating the deceased partner’s final claim, consider capital, accumulated profits or losses, goodwill share and profit up to the date of death.