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Target Exam

CUET

Subject

-- Accountancy Part A

Chapter

Admission of a Partner

Question:

If the premium for goodwill is paid to the old partners directly/ privately by the new partner, what journal entry will be recorded in the books of Partnership Firm:-

Options:

Cash Bank A/c Dr.
To Premium for Goodwill A/c

Premium for Goodwill A/c Dr.
To Sacrificing Partners' Capital A/c

Cash Bank A/c Dr.
Premium for Goodwill A/c Dr.
To Sacrificing Partners' Capital A/c

No journal entry is recorded.

Correct Answer:

No journal entry is recorded.

Explanation:

The correct answer is Option (4) → No journal entry is recorded.

The amount of premium brought in by the new partner is shared by the existing partners in their ratio of sacrifice. If this amount is paid to the old partners directly (privately) by the new partner, no entry is passed in the books of the firm.

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