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• # 78477
• Wed 18 Jan 2012 10:25 PM

Hello,

Can someone please help me with the treatment of goodwill; Question 2. l have been on it the whole week and l cant make it work. Please help

Thank you.

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• # 78479
• Wed 18 Jan 2012 11:00 PM

Hi Ciemandy,

In order to adjust for goodwill (if you are writing goodwill back out of the books) you would:

1. Dr Goodwill, Cr original partners (in original profit sharing ratio)

then to write the goodwill out, you would:

2. Cr Goodwill, Dr new partners

This leaves you with 0 in the goodwill account, and adjusts the partners capital accounts for the goodwill that has been valued.


I assume I am OK to say this as it is not an actual examination question, and is a mock question...

Hope this clarifies things


Cheryl

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• # 78480
• Wed 18 Jan 2012 11:19 PM

Hi Cheryl.

Thank you so much, its  balancing now. And yes it is a mock exam, dont worry.
l really appreciate your help.

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• # 78493
• Thu 19 Jan 2012 09:00 AM

Cherylsaid:

2. Cr Goodwill, Dr new partners


Cheryl”

• www.berrybookkeeping.co.uk
  
  My responses are based on my opinions, not necessarily facts.
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• # 78523
• Thu 19 Jan 2012 08:29 PM

Thank you for the clarifying my email - that is what I meant, but didn't convey it very well, and it could have been taken in 2 ways - blame it on the time of night I sent the reply!


When I said " new partners" I meant both members of the new partnership (as one of the original partners was retiring in this question)

Sorry that this was not clear - ciemandy I hope it didn't mean you did the question wrong. :-/    

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• # 78529
• Thu 19 Jan 2012 09:50 PM

@Cheryl,

No worries, l knew axactly what you meant. Had an idea, just needed some guidance and you did help me.
Thanx again.

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• # 78725
• Tue 24 Jan 2012 10:15 PM

Hi Ciemandy,

Goodwill is introduced usually by an incoming partner of a business. When the Goodwill is introduced the goodwill gets shared between the partners. The incoming partner has the goodwill also in thier capital or current account whichever they chose to use. First thing is first you must always open a goodwill account. For introduced goodwill you dr goodwill with the goodwill share it between them in thier existing profit sharing ratio. The cr is entered into the partners current or capital accounts. If goodwill has to be written out of the accounts we cr goodwill account in the new profit sharing ratio. If goodwill is not written out of the accounts it will remain as a non current (Fixed asset),

Hope this helps

Paula Welsh

Edited at 24 Jan 2012 10:17 PM GMT

• Hello all,
  
  i just noticed we have a forum, just poking around the members area.  My name is Paula welsh and I have been a member since 2005, starting with Associate member and now a full member

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