P, Q and R share profits equally. At the time of P's retirement, goodwill appears in the books at Rs. 3000. P will be credited with ___ amount for Goodwill share.
P, Q and R share profits equally. At the time of P's retirement, goodwill appears in the books at Rs. 3000. P will be credited with ___ amount for Goodwill share.
Solution
✅ Correct Option: 2
When goodwill already appears in the books at the time of a partner's retirement, the retiring partner is entitled to their share of the existing goodwill based on their profit-sharing ratio.
Given Information:
- P, Q, and R share profits equally → Profit-sharing ratio = 1:1:1
- Goodwill in books = Rs. 3,000
- P is retiring
Since P, Q, and R share profits equally, P's share in the partnership =
P's share of Goodwill = × Rs. 3,000 = Rs. 1,000
P will be credited with Rs. 1,000 for his share of goodwill.
The treatment involves:
- Writing off the existing goodwill by debiting all partners' capital accounts in their old ratio (1:1:1)
- Crediting the remaining partners (Q and R) in their gaining ratio to compensate P for his share
The net effect is that P gets credited with Rs. 1,000 as his share of goodwill.
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