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What is the main purpose of settling goodwill when a partner retires?

Answer and explanation

Correct answer: To compensate the retiring partner for their share

Goodwill represents the firm's reputation and earning capacity built up by its partners. The retiring partner is compensated for their share of that goodwill because they give up their interest in the firm.

Related tags

GoodwillRetirementCompensationGoodwill SettlementReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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