If the partnership deed states the method of goodwill settlement, what should be done?

Correct answer: Follow the deed

The partnership deed is the agreement that records the partners’ mutually accepted rights, duties, and procedures. Therefore, when it clearly specifies how goodwill is to be valued or settled on retirement, death, or another reconstitution, that contractual method should be followed first. The partners should not ignore the deed or replace its rule with an automatic equal division. Nor does the deed necessarily require immediate cash payment; settlement may be made through capital accounts, current accounts, or a partner’s loan account, depending on the stated arrangement. Subject to applicable law and the facts of the question, the deed governs the accounting treatment. Thus option A is correct.