When a new partner brings his share of goodwill in cash, the amount is credited to:
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Premium for goodwill account.
When a new partner brings his share of goodwill in cash, the amount is credited to Premium for goodwill account.
The following journal entries will be passed at the time of admission for goodwill-
(1) Goodwill brought in by new partner -
Cash A/c Dr.
To premium for goodwill A/c
(2) Goodwill share brought by new partner is transferred to sacrificers-
Premium for goodwill A/c Dr.
To Sacrificing Partner's Current/Capital A/c