Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Admission of a Partner

Question:

Which account will be debited, in case new partner is unable to bring his/her share of goodwill in cash?

Options:

All Partners' Capital A/c

New Partners' Loan A/c

New Partners' Current A/c

All Partners' Current A/c

Correct Answer:

New Partners' Current A/c

Explanation:

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.