Goodwill Settlement

In the gaining ratio of 2:1, A’s share is 2 out of the total 3 parts. Therefore, the amount debited to A’s account is ₹15,000 × 2/3 = ₹10,000. B will bear the remaining 1/3, or ₹5,000, so ₹5,000 is not A’s amount. Exam tip: Goodwill compensation on a partner’s retirement is debited to the gaining partners in their gaining ratio.

The direct answer is A: the smaller-share partner bears ₹10,000. The gaining ratio is 3:2, so total ratio parts are 3 + 2 = 5. The goodwill compensation of ₹25,000 is divided into five equal parts: ₹25,000 ÷ 5 = ₹5,000 per part. The smaller share is 2 parts, so its burden is 2 × ₹5,000 = ₹10,000, or equivalently ₹25,000 × 2/5 = ₹10,000. Option A is correct. Option B, ₹15,000, is the amount for the larger 3-part share, not the smaller one. Option C, ₹25,000, is the whole compensation and ignores the ratio. Option D, ₹5,000, represents only one ratio part, while the smaller partner has two parts. Memory cue: add ratio parts, find one part, then multiply by the required partner's parts.

If the deed clearly disallows it then the deed is followed. In exams read the deed conditions first.

Goodwill is the value of the firm ability to earn extra profit. In exams link goodwill with earning capacity.

The partner giving up rights and the partners gaining benefit are involved. In exams identify the parties correctly.

A share is (2/4) or (1/2) so the claim is ₹40000. In exams simplify fractions to calculate easily.

C share is (3/8) so (3/8) of ₹24000 is ₹9000. In exams do not forget to credit the retiring partner.

The retiring partner's goodwill amount is calculated as total goodwill × the partner's share = ₹45,000 × \(\frac{2}{9}\) = ₹10,000. Therefore, option A is correct. Option B incorrectly represents a one-third share, which is greater than the given \(\frac{2}{9}\) share. Exam tip: divide the total amount by the denominator first, then multiply by the numerator.

The retiring partner share is always calculated using old profit ratio. In exams use new ratio only for continuing partners.

The direct answer is A, the retiring partner’s capital will increase, assuming goodwill compensation is credited to that partner’s account as stated. Goodwill is the value of a firm’s reputation and other advantages that help it earn extra profit. When a partner retires, the continuing partners compensate the retiring partner for the share of goodwill belonging to that partner. The retiring partner’s Capital Account or Current Account is credited with this amount. A credit increases the balance payable to that partner, so the capital balance increases. Option A is correct for this accounting treatment. Option B is wrong because a credit is not a reduction. Option C is wrong because goodwill compensation does not automatically make the entire capital zero. Option D is wrong because the credited compensation does affect the account balance. The important exam rule is: amount due to a retiring partner is credited to the retiring partner’s account; the exact journal entry may depend on the question’s wording and method.

When a partner retires, the continuing partners compensate the retiring partner for his share of goodwill. This compensation is borne by the continuing partners in their gaining ratio, because they receive the retiring partner’s future share of profit. Here, A’s gain is 4 parts out of a total of 4 + 1 = 5 parts. Therefore, A’s burden is ₹30,000 × 4/5 = ₹24,000. B will bear the remaining ₹6,000, so the total burden is ₹30,000. Option A is correct. The old profit-sharing ratio is not used for this adjustment, and ₹30,000 is the total amount rather than A’s individual burden.

Goodwill may exist as reputation value even if not shown in books. In exams do not ignore hidden goodwill.

The deceased partner final claim is calculated up to the date of death and may include goodwill. In exams note the date of death settlement.

The third partner share is (1/10) so (1/10) of ₹50000 is ₹5000. In exams read ratio parts carefully.

Goodwill is firm reputation and old partners helped build it. In exams take contribution to reputation as the base.

The gaining ratio expresses the relative portions in which continuing partners acquire the retiring partner’s share. The given gains are 1/6 for A and 1/3 for B, so their ratio is 1/6 : 1/3. To remove the denominators, multiply both terms by 6: (1/6 × 6) : (1/3 × 6) = 1:2. Therefore B gains twice as much as A. Option A is correct. Option B reverses the ratio and would incorrectly state that A gains twice as much as B. Options C and D do not arise from the given fractions. This calculation concerns the actual gains, not the partners’ old profit-sharing ratio, so no additional information is needed.

The total of the gaining ratio is 7 + 2 = 9. The larger partner’s burden is ₹36,000 × 7/9 = ₹28,000. ₹8,000 is the burden of the other partner, so it is not the correct choice. Exam tip: add the ratio terms first, then multiply the total amount by the required share.

Goodwill settlement fairly adjusts old and new rights. In exams treat fairness of capital adjustment as the main objective.

When continuing partners continue in their old ratio their gain is also taken in that ratio. In exams check the old ratio of continuing partners.

B share is (1/4) so (1/4) of ₹40000 means ₹10000 will be debited. In exams write off existing goodwill in old ratio.

When the new share decreases the partner does not gain but sacrifices. In exams if new share minus old share is negative treat it as sacrifice.

A retiring partner gives up future profits so his goodwill share is compensated. In exams focus on sacrificing ratio.

The retiring partner receives his share in the old firm's goodwill. This basic principle is frequently tested.

Continuing partners gain a higher future profit share. Gaining ratio is key in goodwill adjustment.

Continuing partners are charged in the ratio of their gain. Always calculate gaining ratio first in exams.