vikas gupta (c.a final....) (714 Points)
26 January 2011Goodwill 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?
Karthik
(student)
(147 Points)
Replied 26 January 2011
Goodwill is not increased when a new partner is admitted.
Faiz Ahmed
( Article Trainee)
(1731 Points)
Replied 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)
Replied 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)
Replied 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.
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