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Why existing goodwill in Balance sheet is distributed among old partners ?

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Why existing goodwill in Balance sheet is distributed among old partners ?
posted Jul 14, 2017 by Naveen Kumar

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When a new partner is admitted, Goodwill of the business is valued afresh. The value of Goodwill is the value relating to the total business including the existing Goodwill. If the existing Goodwill is not written off, it will have the effect of crediting partners with excessive Goodwill. Alternatively, if we want to carry existing Goodwill in the books, then the value of existing Goodwill should be deducted from the fresh value of Goodwill. This excess value of Goodwill should be credited to existing partners capital accounts in their profit sharing ratio.

answer Jul 15, 2017 by Shamita
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