Hidden goodwill at the time of admission of a partner is calculated by comparing:
A. Total capital based on new partner's share and actual total capital of all partners
B. Super profit and normal rate of return
C. Assets and outside liabilities
D. Average profits of last 5 years
Answer: Option A
Solution (By JKSSB Mock Tests)
Hidden goodwill is the excess of the firm's inferred total capital (based on the new partner's contribution and share) over the actual combined capital balances.
Explanation:
Real accounts represent assets and properties. They are permanent accounts and their balances are carried forward to the next year, never closed.
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