Practicing Success
A & B are partners in a firm sharing profits in a ratio of 2:1. They take C as a partner in the firm for 1/5th share. The premium for goodwill is ₹15000. What will be the journal entry, if the new partner paid this premium privately? |
Debit goodwill and credit partners' capital account Debit partners' capital account and credit goodwill No entry passed Either option 1 or 2 |
No entry passed |
The correct answer is option 3- No entry passed. 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. |