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Partnership Doubts..............?

IPCC 640 views 4 replies

vikas gupta

c.a final....

714 Points Posted on 26 January 2011

Goodwill is reputation but why is goodwill increased if partner brings goodwill in cash?

Suppose incoming partner "A" brings goodwill in cash rs. 50000 and capital rs 100000 then partnership says rs50000 as goodwill will increase the present goodwill of the firm....but goodwill is reputation then hw can it be increased thru cash?

Replies (4)

Karthik

student

147 Points Posted on 26 January 2011

Goodwill is not increased when a new partner is admitted.

Faiz Ahmed

Article Trainee

1731 Points Posted on 21 February 2011

Goodwill is not increased in case of admission of a new partner. The new partner provides his share of firms goodwill as he will gain a share in future share of profits. This compensation by incoming partner is credited to sacrificing partner(s) as sacrificing partners give some share of profits in future.

Remember two points in relation to incoming partner rights as per Partnership Act,1932:-

1-- Brings capital for using the assets of the firm.

2-- Brings share of goodwill to share profits(losses) of the firm.

Sandeep Surana

Practicing Chartered Accountant

156 Points Posted on 22 February 2011

I am also agree with Faiz Ahmed

"The new partner provides his share of 'firms goodwill' as he will gain a share in future share of profits"

sahis

CA Final BBA

164 Points Posted on 09 March 2011

Goodwill is what a firm acquired during its life time. only an existing firm has goodwill. when a new partner entered in to an existing firm he is bound to pay his share of goodwill and in normal treatment it will shared by old partners in their sacrifising ratio. and it should be noted that goodwill appears only when there is a change in the profit sharing ratio between partners.