Practicing Success
A is admitted in the partnership firm for the 1/4th share in profits for which he brings ₹25000 for premium for goodwill. In which ratio this premium for goodwill is taken by old partners? |
Old ratio New ratio Sacrificing ratio None of these |
Sacrificing ratio |
When the new Partner brings goodwill in cash. 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. But, when the amount is paid through the firm, which is generally the case, the following journal entries are passed: |