If the premium for goodwill is paid to the old partners directly/ privately by the new partner, what journal entry will be recorded in the books of Partnership Firm:-
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → No journal entry is recorded.
The amount of premium brought in by the new partner is shared by the existing partners in their ratio of sacrifice. 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.