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Subjects

Accountancy

Goodwill Settlement

In this Class 12 Accountancy topic, students learn how goodwill is settled when a partner retires or dies during the reconstitution of a partnership firm. The topic explains the purpose of goodwill adjustment, the retiring or deceased partner’s entitlement, and the accounting treatment for recording the amount due from continuing partners. Students also practise journal entries and understand how the adjustment affects partners’ capital accounts, gaining ratio, and the firm’s financial records.

Easy · Level 4 · 25 questions

Practice questions

01The goodwill compensation payable to the retiring partner is ₹15,000. If the gaining partners A and B have a gaining ratio of 2:1, what amount will be debited to A’s Capital Account?

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02If gaining ratio is (3:2) and total goodwill compensation is ₹25000 then what burden falls on the smaller share partner?

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03In which situation may the retiring partner not get a separate goodwill claim?

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04The amount of goodwill represents whose earning capacity?

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05Between whom is goodwill adjusted at the time of retirement?

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06A B C share profits in (2:1:1). A retires. Goodwill is ₹80000. What is A claim?

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07B retires. His goodwill share is ₹24000. A and C gain in ratio (5:3). How much will C be debited?

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08If a firm's goodwill is ₹45,000 and the retiring partner's share in it is \(\frac{2}{9}\), what amount will the partner receive as the goodwill claim?

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09Which is a common mistake in goodwill adjustment?

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10What is the effect on the retiring partner capital when goodwill compensation is allowed?

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11A, B and C are partners. C retires. C’s share of goodwill is ₹30,000, and A and B gain in the ratio 4:1. How much of the goodwill burden will A bear?

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12If goodwill is not shown in books does it mean it has no value?

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13When is goodwill settlement done on the death of a partner?

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14If old partners share profits in ratio (6:3:1) and goodwill is ₹50000 then what is the third partner share?

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15Why does the retiring partner right in goodwill arise?

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16A and B are continuing partners. A’s gain is 1/6 and B’s gain is 1/3. What is their gaining ratio?

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17On the retirement of a partner, the goodwill compensation is ₹36,000. If the continuing partners bear it in the gaining ratio of 7:2, what amount will be borne by the partner with the larger share?

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18What is the final objective of goodwill settlement on retirement or death?

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19If continuing partners share profits in their old ratio after retirement then what will be their gaining ratio?

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20A B and C share profits in old ratio (2:1:1). Goodwill appears in books at ₹40000. How much will B be debited when old goodwill is written off?

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21If a continuing partner new share becomes less than his old share then what is he called?

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22Why is goodwill adjusted for a retiring partner?

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23Who normally receives the benefit of goodwill at retirement?

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24If continuing partners take the retiring partner's share of profit then what do they do?

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25In which ratio is goodwill adjustment charged to continuing partners on retirement?

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