Briefly explain why goodwill should be paid under the following circumstances: (i) By a partner on admission to a partnership. (ii) To a partner on...

      

Briefly explain why goodwill should be paid under the following circumstances: (i) By a partner on admission to a partnership. (ii) To a partner on retirement from a partnership

  

Answers


Mutiso
Goodwill is that advantage that an existing business may have over a newly established
business. The advantage is in the form of the ability to generate revenue and profits as
a result for example customer loyalty, location and marketing.
(i) On admission of a new partner, the new partner will start enjoying the
benefits of the existing partnership as a result of the goodwill created by
the previous partners. The newly admitted partner should therefore pay
for his share of the goodwill.
(ii) On retirement of one of the partners, the remaining partners will continue
enjoying the benefits that the retired partner helped create. Therefore it will
be important for the retiring partner to be paid his share of the goodwill.
Mutiso answered the question on November 20, 2018 at 05:15


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