Question

When a new partner brings his share of goodwill in cash, the amount is debited to ______.

Options

• Goodwill A/c

• Capital A/c of the new partner

• Cash A/c

• Capital A/cs of the old partners

Answer 1

When a new partner brings his share of goodwill in cash, the amount is debited to Cash A/c.

Explanation:

This is due to the fundamental accounting rule: “Debit what comes in.” The business physically receives cash, which is an asset. The initial journal entry records this inflow of cash into the firm’s books. The corresponding credit entry is made to the ‘Premium for Goodwill Account,’ which is later used to compensate the sacrificing partners.