Assertion (A): A and B are partners sharing profits in 3 : 2. They admit C into the partnership, which he takes $\frac{1}{6}$ th from A and $\frac{1}{12}$ th from B. Goodwill existed in their books at ₹ 60,000. C brought ₹ 1,50,000 as premium for goodwill, and after adjusting the existing goodwill of ₹ 60,000, the balance of ₹ 90,000 was distributed between A and B in the ratio 2 : 1. Reason (R): Goodwill of ₹ 60,000 existing in the books was written off in the old ratio, and ₹ 1,50,000 brought in by C was distributed in a sacrificing ratio of 2 : 1. In the context of the above two statements, which of the following is correct?

Question

KollegeApply · Accepted Answer

(A) is incorrect, but (R) is correct. Explanation: Reason (R) correctly states the universally accepted accounting principle: existing goodwill must be written off in the old ratio, and the premium brought in by the new partner must be distributed in the sacrificing ratio. Assertion (A), however, describes a flawed calculation method. It wrongly suggests subtracting the written-off goodwill (₹ 60,000) from the incoming premium (₹ 1,50,000) before distribution. These are separate transactions. The full ₹ 1,50,000 should have been distributed to the sacrificing partners, making the procedure detailed in (A) incorrect.

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