Concept:If goodwill is not kept in the business, it is first recorded and then completely written off among all partners.
Explanation:First, goodwill is brought into the books at its full value.
The entry is: Debit Goodwill Account and Credit Old Partners' Capital Accounts in the old profit-sharing ratio.
Since the goodwill is not retained, it must now be written off.
The write-off entry is: Debit All Partners' Capital Accounts, including the new partner, in the new profit-sharing ratio.
Credit Goodwill Account with the same amount.
This removes goodwill from the books and adjusts each partner's capital fairly.
Answer:D. Partners capital account and credit goodwill account.