Goodwill Settlement

Correct answer: A. New share minus old share

Gaining ratio is the ratio in which continuing partners gain the share of a retiring or outgoing partner. For each gaining partner, the governing formula is: Gain = New Share − Old Share. After calculating the individual gains, they are expressed in a ratio and used to adjust goodwill compensation, usually because the gaining partners benefit from the outgoing partner’s share. Therefore, option A is correct. Option B is the formula for sacrifice when a partner’s share decreases in an admission situation, not gain. Options C and D combine unrelated accounting figures and cannot measure a change in profit-sharing entitlement. The phrase “new minus old” should always be checked partner by partner.

Correct answer: A. ₹24,000

When a partner retires, the continuing partners compensate the retiring partner for the retiring partner’s share of goodwill. The burden is distributed according to the gaining ratio because the continuing partners receive the benefit of the share released by the retiree. Here the gaining ratio is 2:1, so the first partner bears 2 out of 3 total parts. Calculation: First partner’s burden = ₹36,000 × 2/3 = ₹24,000. The second partner bears ₹36,000 × 1/3 = ₹12,000, and the two burdens together equal ₹36,000. Thus option A is correct. Option B is the second partner’s burden, option C does not follow the 2:1 ratio, and option D assigns the entire amount to the first partner.

Correct answer: A. Gaining partners' capital accounts

At the death of a partner, the deceased partner’s estate is entitled to the partner’s share of goodwill. The continuing partners obtain the benefit of that share because they continue the business, and they must compensate the estate in their gaining ratio. Accordingly, the gaining partners’ capital or current accounts are debited for the amount they bear, while the deceased partner’s executor account is credited with the total amount due. Cash is debited only if an actual cash payment is made, and the purchases account has no connection with goodwill. Therefore option A gives the correct accounts to debit.

Correct answer: A. ₹8,000

A retiring partner’s share of goodwill is normally calculated using the partner’s old profit-sharing fraction, unless a different agreement is specifically stated. The old ratio is 2:2:1, so the total number of parts is 2 + 2 + 1 = 5. C has one part and therefore owns 1/5 of the firm’s goodwill. Calculation: C’s goodwill share = ₹40,000 × 1/5 = ₹8,000. The amount ₹16,000 corresponds to two-fifths, ₹20,000 corresponds to one-half, and ₹32,000 corresponds to four-fifths; none represents C’s one-fifth share. Hence option A is correct. The calculation is based on the old ratio because C’s entitlement arose before retirement.

Correct answer: A. ₹21,000

The governing concept is that a retiring partner’s goodwill entitlement is based on that partner’s old profit-sharing fraction, unless the question provides a special agreement. The old ratio is 4:3:3, giving a total of 10 parts. B owns 3 of those 10 parts, so B’s fraction is 3/10. Calculation: B’s share of goodwill = ₹70,000 × 3/10 = ₹21,000. Option B, ₹28,000, represents four-tenths and would relate to A’s share. Option C, ₹49,000, represents seven-tenths, while option D, ₹7,000, represents one-tenth. Therefore only option A corresponds to B’s three-tenths entitlement and is correct.

Correct answer: A. To give the retiring partner his share

The retiring partner is entitled to his share in the existing goodwill of the firm. In exams connect it with his old profit share.

Correct answer: B. Retiring partner capital account

The goodwill share is credited to the retiring partner capital account. It increases the amount payable to him.

Correct answer: B. Gaining continuing partners

The burden of goodwill falls on continuing partners who gain profit share. Therefore gaining ratio is important in the calculation.

Correct answer: A. New share minus old share

In gaining ratio old share is deducted from new share. The formula is ( \text{gain}=\text{new share}-\text{old share} ).

Correct answer: B. In their old ratio

When new ratio is not given the old ratio of continuing partners is assumed to continue. In such questions it may also become the gaining ratio.

Correct answer: B. ₹10000

C share is ( \frac{2}{10} ) so his goodwill share is ₹10000. In exams first add the total of the ratio.

Correct answer: B. ₹12000

C share is ( \frac{2}{10} ) so his share of ₹60000 is ₹12000. Always use the retiring partner old share.

Correct answer: C. ₹40000

A deceased partner is also entitled to his share of goodwill. C share is ( \frac{5}{10} ) so the amount is ₹40000.

Correct answer: C. ₹64000

C share is ( \frac{2}{8} ) and it equals ₹16000. So total goodwill is (16000 \times \frac{8}{2}=64000).

Correct answer: A. ₹9000

C profit share is ( \frac{1}{10} ) so his goodwill share is ₹9000. In such questions take the ratio total carefully.

Correct answer: A. Only A

A share increases from ( \frac{2}{5} ) to ( \frac{3}{5} ). B share remains ( \frac{2}{5} ) so only A gains.

Correct answer: A. ( \frac{1}{6} )

The direct answer is A, one-sixth. First convert the old ratio 3:2:1 into fractions of the whole. The total is 3+2+1=6, so B’s old share is 2/6. After C retires, A and B share the whole business equally, so B’s new share is 1/2, or 3/6. B’s gain equals new share minus old share: 3/6 − 2/6 = 1/6. Therefore option A is correct. Option B, 1/3, is too large; it does not result from the subtraction. Option C, 1/2, is B’s new share, not B’s gain. Option D, zero, would be correct only if B’s share had not increased, but it increased from 2/6 to 3/6. Keep the distinction clear: new share tells the final entitlement, while gaining share tells how much extra was received.

Correct answer: A. New ratio divides future profit and gaining ratio divides goodwill burden

New ratio is for future profits while gaining ratio is used in goodwill adjustment. Mixing both is a common mistake.

Correct answer: A. Gaining partners capital accounts debit and retiring partner capital account credit

Without opening goodwill account the adjustment is made directly through capital accounts. Gaining partners bear the burden.

Correct answer: A. Write it off among all partners in old ratio

Existing goodwill in books is written off among all old partners in old ratio. After that fresh goodwill adjustment is made.

Correct answer: A. ₹7500

C share is ( \frac{1}{4} ) so his share of ₹30000 is ₹7500. Always write off old goodwill in old ratio.

Correct answer: A. ₹4800

C goodwill share is (48000 \times \frac{1}{6}=8000). A and B bear it in 3:2 so A burden is ₹4800.

Correct answer: A. Only A ₹20000

A share increases from ( \frac{5}{10} ) to ( \frac{7}{10} ) and B share remains same. So only A bears C goodwill share of ₹20000.

Correct answer: A. 1:1

Under the old ratio, A’s share was \(\frac{4}{9}\) and B’s share was \(\frac{3}{9}\). Under the new ratio of 5:4, A’s share becomes \(\frac{5}{9}\) and B’s share becomes \(\frac{4}{9}\). Thus, both A and B gain \(\frac{1}{9}\), so the gaining ratio is \(\frac{1}{9}:\frac{1}{9}=1:1\). In an exam, first convert both ratios into individual fractions and then compare the increase in each partner’s share.

Correct answer: A. All partners capital accounts debit and goodwill account credit

When old goodwill is removed all partners capital accounts are debited in old ratio. Goodwill account is credited and closed.