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The deceased partner’s share of goodwill is considered compensation for which right?

Answer and explanation

Correct answer: Right to a share in future profits

Goodwill reflects the firm’s reputation, customer relationships and capacity to earn higher profits in the future. Since the continuing partners retain the benefit of this goodwill after the partner’s death, the deceased partner is credited with his share as compensation for his right to future profits. It is not a share in book assets, a loan or a current operating expense. Exam tip: In admission, retirement or death adjustments, link goodwill with the partner’s right to future profit-earning benefits.

Related tags

Partnership AccountsGoodwillDeceased Partner ShareReconstitutionAccountancy Class 12Deceased Partner’s ShareDeceased Partner S ShareReconstitution Retirement Or Death Of A Partner

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