Q.At the time of admission, the goodwill brought by the new partner may be credited to the Capital accounts of :

Goodwill brought in by a new partner is credited to the Capital accounts of the sacrificing partners in their sacrificing ratio — option (c).

In the Admission of a Partner topic of the TN HSC Commerce syllabus, a new partner acquires his share of future profits from the existing partners, who therefore sacrifice part of their share. To compensate them, the new partner pays a premium for goodwill.

When the goodwill (premium) is brought in cash and retained in the business, the accounting treatment is:

Cash/Bank A/c Dr.

To Premium for Goodwill A/c

Premium for Goodwill A/c Dr.

To Sacrificing Partners' Capital A/c (in the sacrificing ratio)

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