12th: Accountancy Guide Chapter 4 !!link!!

Goodwill is the value of profits earned over and above the "normal" rate of return. Capitalization Method:

: A nominal account prepared to record the sale of assets and payment of liabilities. The final balance (profit or loss) is transferred to partners' capital accounts in their profit-sharing ratio. 12th accountancy guide chapter 4

Bank A/c (Actual cash received) Dr. [Total capital + Premium] To New Partner’s Capital A/c (Only capital portion) To Old Partners’ Capital A/c (Premium distributed in Sacrificing Ratio) Goodwill is the value of profits earned over