S1: In a partnership, if a new partner is admitted and brings his share of goodwill in cash, the goodwill account is credited. S2: If the goodwill account already exists in the books, it is written off among the old partners in their old profit-sharing ratio before admission. Which statement(s) is/are correct?
Explanation:
S1 is incorrect because AS 26 prohibits opening a goodwill account; the cash brought is credited to the old partners' capital accounts in their sacrificing ratio. S2 is correct; existing goodwill is written off in the old ratio before the new partner's admission.
Which of the following is/are correct regarding the accounting equation? 1. The equation always holds true under the double entry system. 2. Purchase of goods on credit increases assets and liabilities. 3. Payment to creditors decreases assets and increases liabilities. 4. Introduction of capital by the proprietor increases both assets and capital.
Explanation:
Statement 3 is incorrect because payment to creditors decreases both assets (cash/bank) and liabilities (creditors). 1, 2, and 4 are correct.
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