Target Exam

CUET

Subject

-- Accountancy Part A

Chapter

Admission of a Partner

Question:

When goodwill does not exist in the books, ............... are credited with their share of goodwill and new partner is.......... by the amount of goodwill not brought by him.

Options:

Sacrificing partner, credited

Sacrificing partner, Debited

Old partner, Debited

Old partner, credited

Correct Answer:

Sacrificing partner, Debited

Explanation:

The correct answer is option 2- Sacrificing partner, Debited.

When goodwill does not exist in the books, sacrificing partners are credited with their share of goodwill and new partner is debited by the amount of goodwill not brought by him. The journal entry in this case is-
Incoming (New) Partners Current A/c    Dr. 
          To Sacrificing Partners Capital A/c (individually)
(Account of goodwill not brought in by new partner)

Sometimes the new partner brings part of premium for goodwill in cash. In such a situation, new partners  current account will be debited by the amount not brought by new partner.