S1: In the case of admission of a partner, if the new partner brings his share of goodwill in cash, the existing partners' capital accounts are credited in their sacrificing ratio. S2: If the new partner is unable to bring his share of goodwill in cash, the goodwill account is opened in the books of the firm. Which statement(s) is/are correct? MCQ with Answer and Explanation
S1: In the case of admission of a partner, if the new partner brings his share of goodwill in cash, the existing partners' capital accounts are credited in their sacrificing ratio. S2: If the new partner is unable to bring his share of goodwill in cash, the goodwill account is opened in the books of the firm. Which statement(s) is/are correct?
A. Both S1 and S2
B. S1 only
C. Neither S1 nor S2
D. S2 only
Answer: Option B
Solution (By JKSSB Mock Tests)
S1 is correct. S2 is incorrect because AS 26 prohibits the recognition of self-generated goodwill in the books; hence, the goodwill account cannot be opened. Instead, the adjustment is passed through the partners' capital accounts.
Explanation:
The Cash Flow Statement provides historical information about changes in cash and cash equivalents, categorized into operating, investing, and financing activities.
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