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
The cash a new partner brings for his share of goodwill is called premium for goodwill. When it is paid through the firm, Bank is debited and Premium for Goodwill Account is credited:
Bank A/c Dr.
To Premium for Goodwill A/c
The premium is then shared by the old (sacrificing) partners in their sacrificing ratio. The new partner's own capital account is credited only with the capital he brings, not with the premium, and the Bank Account is debited, not credited.
NCERT (2026-27 edition):
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