Practicing Success
Why the amount of goodwill is paid by new partner? |
For the payment of capital to firm For sharing the profit by old partners For purchase of assets by all partners None of these |
For sharing the profit by old partners |
The premium for goodwill is an additional amount paid by the new partner to compensate to the old partners for the part of profit taken up by him. When this amount of premium is paid privately by the incoming partner to the old partner's, no entry is recorded in the books of accounts. |