How goodwill is recorded on the retirement of a partner ........

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How goodwill is recorded on the retirement of a partner?

Remaining Partner’s Capital A/cs Dr. (In Gaining Ratio) To Retiring Partner’s Capital A/c (with his share of goodwill)

Remaining Partner’s Capital A/cs Dr. (In New Ratio) To Retiring Partner’s Capital A/c (with his share of goodwill)

Goodwill A/c Dr. To All Partner’s Capital A/cs (In Old Ratio)

Goodwill A/c Dr. To Retiring Partner’s Capital A/c (with his share)

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Explanation:

- Option 1: Remaining Partner’s Capital A/cs Dr. (In Gaining Ratio) To Retiring Partner’s Capital A/c (with his share of goodwill). This is correct. The remaining partners compensate the retiring partner for their share of goodwill by debiting their capital accounts in the gaining ratio.

- Option 2: Remaining Partner’s Capital A/cs Dr. (In New Ratio) To Retiring Partner’s Capital A/c (with his share of goodwill). This is not correct because the adjustment is made in the gaining ratio, not the new ratio.

- Option 3: Goodwill A/c Dr. To All Partner’s Capital A/cs (In Old Ratio). Not applicable, as goodwill is usually adjusted through capital accounts without opening the goodwill account.

- Option 4: Goodwill A/c Dr. To Retiring Partner’s Capital A/c (with his share). Incorrect, as it doesn't involve all partners and is not the common practice.

Correct Answer: Option 1 (Remaining Partner’s Capital A/cs Dr. (In Gaining Ratio) To Retiring Partner’s Capital A/c (with his share of goodwill))