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When a retiring partner’s share of goodwill is adjusted without recording goodwill in the reconstituted firm, which journal entry is correct?

Answer and explanation

Correct answer: Gaining Partners’ Capital A/c Dr. To Retiring Partner’s Capital A/c

The gaining partners compensate the retiring partner for their share of goodwill. Therefore, the gaining partners’ capital accounts are debited in the gaining ratio and the retiring partner’s capital account is credited, without recording goodwill as an asset.

Related tags

Goodwill AdjustmentRetirement Of A PartnerJournal EntryGoodwill SettlementReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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