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

Why existing goodwill in Balance sheet is distributed among old partners at the time of admission? However, other assets are revalued.Why can't we treat goodwill appearing in Balance sheet like other assets.

asked Feb 18, 2017 in Partnership-Admission by caankitjain (8 points) 3,344 views

1 Answer

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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.

answered Feb 19, 2017 by jbsclasses (3,971 points)
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