Target Exam

CUET

Subject

-- Accountancy Part A

Chapter

Admission of a Partner

Question:

In which case, New Partners' Current A/c is debited at the time of admission of a partner?

Options:

When new partner is unable to bring his share of goodwill in cash

When new partner brought his share of goodwill in cash

When new partner paid goodwill premium privately to old partners

When new partner paid goodwill premium privately to sacrificing partners

Correct Answer:

When new partner is unable to bring his share of goodwill in cash

Explanation:

The correct answer is option 1- When new partner is unable to bring his share of goodwill in cash.

New Partners' Current A/c is debited, when new partner is unable to bring his share of goodwill in cash at the time of admission of a partner.


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.