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Hidden goodwill

When the value of goodwill is not given in the question, it has to be calculated on the basis of total capital/net worth of the firm and profit sharing ratio.
 


 

Illustration 8

X and Y are partners with capitals of ₹ 10,000 each. They admit Z as a partner for 1/4th share in the profits of the firm. Z brings ₹ 16,000 as his share of capital.
 

The Profit and Loss account showed a credit balance of ₹ 8,000 as on the date of admission of Z. Give the necessary journal entry to record goodwill.
 



Working Note :-

 

Therefore, Hidden Goodwill =





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