A. Goodwill account and credit partners capital account
B. Cash account and credit goodwill account
C. Goodwill account and credit cash account
D. Partners capital account and credit goodwill account
Correct Answer:
Option D – Partners capital account and credit goodwill account
Explanation
When goodwill is raised in the books at full value, the entry is
Dr Goodwill Account
Cr Old partners capital account (old ratio)
When the raised goodwill is written off, entry will be:
Dr All partners capital account
Cr Goodwill accounts
Note: goodwill written off includes new partners in the new profit sharing ratio
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