Treatment of Goodwill on Retirement :

In case of retirement of a partner, goodwill is valued in the same manner in which it is valued in case of admission of a partner.

In this case, the continuing partners will gain in terms of profit sharing ratio. Hence, the continuing partners have to share the goodwill of the retiring partner in the gaining ratio. In this case, the retiring partner’s capital account is credited with his share of goodwill and the continuing partners’ capital accounts are debited with the amount in the gaining ratio.

Goodwill Account is not opened; only capital accounts of the partners may be debited and credited with the necessary amounts