Treatment of Goodwill in Dissolution class 12

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Looking for the accounting treatment of goodwill in the dissolution of partnership Firm in class 12 CBSE, ISC and State Board.

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What happens to goodwill on dissolution of partnership?

We all know goodwill is an Intangible Asset. When the firm is shut down, It is common practice to sell all the assets.

Thus goodwill that appeared in the Balance Sheet is transferred to the Debit side of the Realisation Account to be sold.

Journal Entry of Goodwill in Dissolution of the partnership Firm

Following are the accounting treatment with journal entries of goodwill at the time of dissolution of the partnership firm

When goodwill is transferred to Realisation Account.

Realisation A/c Dr.
To Goodwill A/c
(Being goodwill transferred to realisation a/c)

When goodwill is sold in cash

Bank (Cash) A/c Dr.
To Realisation A/c
(Being goodwill is sold)

when goodwill is taken over by Partner

Partner’s Capital A/c Dr
To Realisation A/c
(Being goodwill is taken over by partner)

Note:- If Nothing is mentioned about the realisation amount of goodwill. It is assumed the market value of goodwill is nil and nothing is realised.

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Anurag Pathak
Anurag Pathak

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