There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the codes provided below-

Assertion: At the time of admission of a partner, the new partner must bring his share in goodwill in cash to compensate the sacrificing partner.
Reasoning: New partner may or may not bring his share of goodwill in cash to compensate the Sacrificing Partner or Partners. Sacrificing Partners may be compensated by debiting new partner’s Current Account and crediting Sacrificing Partner’s Capital Accounts.

Assertion (A) is not true but Reasoning (R) is correct.

The correct answer is option 4- Assertion (A) is not true but Reasoning (R) is correct.

Assertion: At the time of admission of a partner, the new partner must bring his share in goodwill in cash to compensate the sacrificing partner.  This is not true as it is not compulsion to bring goodwill in cash.

Reasoning: New partner may or may not bring his share of goodwill in cash to compensate the Sacrificing Partner or Partners. Sacrificing Partners may be compensated by debiting new partner’s Current Account and crediting Sacrificing Partner’s Capital Accounts. This is true. It is not necessary to bring Premium of goodwill in cash. When the new partner does not bring goodwill in cash, partly or fully, the Goodwill not brought by the new partner will be debited to current account of new partner while sacrificing partners' capital accounts will be credited for their respective shares.

THUS, ASSERTION IS NOT TRUE BUT REASON IS TRUE.

The amount of premium brought in by the new partner is shared by the existing partners in their ratio of sacrifice.

1) 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.

2) But, when the amount is paid through the firm, which is generally the case, the following journal entries are passed:
(i) Bank A/c
     To Premium for Goodwill A/c
(Amount brought by new partner as premium)
(ii) Goodwill A/c
    To Sacrificing Partners Capital A/c (Individually)
(Goodwill distributed among the existing partners’ in their sacrificing ratio).

3) When the new partner does not bring the share of goodwill, and 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)