Need for valuing goodwill: If the mutual rights of the partners modifies then the party which makes a sacrifice should be compensated. This basis of compensation is goodwill therefore we require calculating goodwill. Mutual rights change beneath following circumstances:
A) If profit sharing ratio alters
B) On admission of a partner
C) On death or retirement of a partner
D) If amalgamation of two firms occurred.
E) If partnership firm is sold.