Accountancy Part AReconstitution of Partnership Firm: Retirement and Death

Select the amount brought by Hari in cash as premium for goodwill on…

Read the following passage and answer the question.

Ravi, Kavi and Sunny are partners in a firm sharing profits and losses in the ratio 4 : 2 : 3. On 1^st April 2022, Sunny gives notice for his retirement. His share was taken by Ravi and Kavi in 13 : 11 and goodwill of the firm was valued at ₹ 72,000.

After three months, they admit Hari as a new partner for 1/5^th share in firm who brings ₹ 2,00,000 as capital and necessary amount for goodwill in cash which was valued at ₹ 80,000 for the firm. Hari acquired his share equally from Ravi and Kavi.

Select the amount brought by Hari in cash as premium for goodwill on his admission to the partnership firm.

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → ₹ 16,000

A new partner brings his share of goodwill (premium for goodwill) to compensate the old partners for the profit share they give up.

Goodwill of the firm = ₹80,000

Hari's share = 1/5

Premium for goodwill brought by Hari = ₹80,000 × 1/5 = ₹16,000

The ₹2,00,000 is his capital, not goodwill; ₹80,000 is the goodwill of the whole firm.

NCERT (2026-27 edition):
Treatment of Goodwill – “As stated earlier, the incoming partner who acquires his share in the profits of the firm from the existing partners brings in additional amount to compensate them for loss of their share in super profits. It is termed as his share of goodwill (also called premium for goodwill).”