When goodwill is not retained in the business, the entries in the new partners books will be to debit______________
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: D
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
