JAMB - Accounts Principles Of Accounts (2024 - No. 43)
Goodwill is taken into account in partnership business when
the business is being dissolved
the business has good customer relations
a new partner is admitted
when the business is making huge profit
Explanation
When a new partner joins the existing partnership, they bring in capital or expertise. The existing goodwill of th business (positive reputation, customer base, etc.) might justify paying the existing partners a premium above the book value of their capital investment. This premium is recorded as goodwill.
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