Accountancy Guide

Goodwill A well-established business develops an advantage of good name, reputation and wide business connections. This helps the business to earn more profits as compared to a newly set up business,  the monetary value of such advantage is known as “Goodwill” .  In other words, goodwill is the value of the reputation of a firm in respect of the profits expected in future over and above the normal profits. Goodwill in Partnership Goodwill is also one of the special aspects of partnership accounts which requires adjustment (also valuation if not specified) at the time of reconstitution of a firm viz., a change in the profit-sharing ratio, the admission of a partner or the retirement or death of a partner. Factors Affecting the Value of Goodwill The main factors affecting the value of goodwill are as follows: 1. Nature of business: A firm which has stable demand for its products or when demand for its products is higher than the supply, then the firm is able to earn more profi...

  ACCOUNTING FOR PARTNERSHIP Section 4 of Partnership Act 1932                 “Partnership is a relation between persons who have agreed to share the profits of a lawful business carried on by all or any of them acting for all”.             Persons who have entered into partnership with one another are individually called ‘partners’ and collectively called ‘firm’.             The name under which the business is carried, is called the ‘firm’s name’. A partnership firm has no separate legal entity, apart from the partners constituting it. Thus, the essential features of partnership are:  1. Two or More Persons  4. Mutual Agency 2. Agreement                    5. Sharing of Profit 3. Business               ...