Goodwill is recognized in partnership accounts when
A. The business makes a huge profit B. The business has good customer relationship C. A partner is dormant D. A new partner is admitted
Correct Answer: D
Explanation
Goodwill is recorded in the books only when some consideration in money or money’s worth is paid for it. Thus, in the context of a partnership firm, the need for valuation of goodwill arises at the time of: Change in the profit sharing ratio amongst the existing partners Admission of a new partner The retirement of a partner Death of a partner Dissolution of a firm where business is sold as going concern. Amalgamation of partnership firms
