Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 19 - No. 5)
How is the goodwill of a partnership usually treated when a new partner is admitted?
It is ignored.
It is written off against the partners' capital accounts.
It is recorded as an asset and is often written off or amortized over time.
It is distributed to the original partners based on their profit-sharing ratio.
Explanation
Goodwill is recognized as an asset if the new partner pays a premium to join the partnership.
Comments (0)
