When a new partner brings his share of goodwill in cash, the amount is credited to:

Premium for goodwill account

The correct answer is option 1- Premium for goodwill account.

When a new partner brings his share of goodwill in cash, the amount is credited to Premium for goodwill account.

For the right to acquire share in the assets and profits of the partnership firm, the partner brings an agreed amount of capital either in cash or in kind. Moreover, in the case of an established firm which may be earning more profits than the normal rate of return on its capital the new partner is required to contribute some additional amount known as premium or goodwill. This is done  primarily to compensate the sacrificing partners for loss of their share in super profits of the firm. The amount of premium brought in by the new partner is shared by the existing partners in their ratio of sacrifice. If the amount is paid through the firm, 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).