Accountancy Part AAdmission of a Partner

At the time of admission of a new partner, in the case of fixed capit…

At the time of admission of a new partner, in the case of fixed capital method, if the sacrificing partner withdraw their amounts of goodwill (in full or in part), the following journal entry will be recorded:-

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Sacrificing Partners' Current A/c Dr. To Bank A/c

The premium for goodwill brought by the new partner is credited to the sacrificing partners, because they gave up part of their share of profit. If they then withdraw that amount, their accounts are debited and Bank is credited. Under the fixed capital method, capitals stay fixed and all such items pass through the partners' current accounts, so the debit goes to the sacrificing partners' current accounts.

Why the other options are incorrect

Option (1) Sacrificing Partners' Capital A/c Dr. To Bank A/c — Incorrect. This is the entry under the fluctuating capital method; with fixed capitals the capital accounts are not touched.
Option (3) Gaining Partners' Current A/c Dr. To Bank A/c — Incorrect. The premium belongs to the sacrificing partners, so they are the ones who withdraw it.
Option (4) Gaining Partners' Capital A/c Dr. To Bank A/c — Incorrect. Wrong partners and the wrong account for fixed capitals.

NCERT (2026-27 edition):
Maintenance of Capital Accounts of Partners – “… Under the fixed capital method, the capitals of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement among the partners. All items like share of profit or loss, interest on capital, drawings, interest on drawings, etc. are recorded in a separate accounts, called Partner’s Current Account.”

NCERT (2026-27 edition):
Treatment of Goodwill

Extract from the NCERT textbook