Goodwill account debit ( cash goodwill ) xxxxxxxxx New partner account debit ( not in cash goodwill ) xxxx To old partner capital account in sacrifice ratio xxxxxxx
6th method
If goodwill already exits in balance sheet of old partner , then it must be transfer to old partner ’ s capital account in old ratio . Other method is same above from 1 to 5 method .
Entry passed for transferring of old goodwill
Old partner ’ s capital account debit xxxxxxx To goodwill xxxxxxx
7th method
If new partner brings other asset as goodwill of his share of goodwill . Then following entry will pass
Asset account debit xxxxxx To goodwill account xxxxxxxx
Goodwill account debit xxxxxxxxx To old partner ’ s capital account in sacrifice ratio xxxxxxxxxx
Accounting treatment at the time of retirement
In any partnership firm when a partner retires from a firm it is the duty of remaining partner to give him his share because he has to spend his remaining life . So at this time accounting treatment is very necessary in the books of firm . I am giving some tips for easy recording these transactions
� Calculate new profit sharing ratio and calculate gaining ratio by deducting new profit sharing ratio from old ratio .
� Calculate profit or loss on revaluation of assets and liabilities and transfer it to retiring partner ' s capital account .
� Calculate the goodwill share of retiring partner and transfer to retiring partner ' s capital account ( credit side with his share )