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)