When a new partner brings cash for goodwill, the amount is credited to the __________ .

Premium for Goodwill Account

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Capital Account of the new partner

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Cash Account

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None of the above

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Solution

The correct option is C Premium for Goodwill Account
Premium for goodwill is the additional amount brought in by the incoming partner to compensate for the loss in share of the super profits of the old partners. This extra amount is credited to the premium for goodwill account and is distributed among the old partners in their sacrificing ratio.
The accounting entry is:
1. Cash a/c.... Dr.
To Premium for Goodwill a/c
(Being premium for goodwill brought in by the new partner)

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