When the incoming partner brings in his share of premium for goodwill in cash, it is adjusted by crediting to ____________ .

incoming Partner's Capital Account

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premium for Goodwill Account

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sacrificing Partner's Capital Accounts

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none of the above

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Solution

The correct option is D sacrificing Partner's Capital Accounts
Premium for goodwill is the extra amount brought in by the incoming partner to compensate the old partners for their loss in the share of super profits of the firm. This extra amount is distributed among the old partners in their sacrificing ratios by crediting their capital accounts.

The accounting entry is:
Premium for goodwill a/c..... Dr
To Old partner's Capital a/c

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Similar questions

Q. When required amount for premium for goodwill is not brought in by new partner, goodwill account is raised in the books of the firm by debiting goodwill account and crediting partners capital account in old profit sharing ratio and written off in ______ if it agreed not show goodwill in the books of the firm OR ALTERNATIVELY premium for goodwill should be adjusted through partners capital account by debiting new partners share of goodwill to his account and crediting old partners capital accounts in _________.

Goodwill brought in by the incoming partner in cash for joining in a partnership firm is adjusted by giving affect to old partners capital accounts in:

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