when a new partner bring his share of goodwill in cash the amount is debited to
Answers
Answer: When a new partner bring his share of goodwill in cash, the amount is debited to Cash A/C or Bank A/C.
When a new partner is admitted into the business, he brings in capital and his share of goodwill.
The existing partners have to sacrifice their share of profit for the new partner. And thus, the partnership agreement changes accordingly.
The purpose of admitting new partner is for increasing the capital of partnership firm. The new partner can bring capital in cash or kind.
When new partner brings his share of goodwill in cash and it is retained in the business, the following entry is passed:
Cash / Bank A/c Dr.
To Goodwill A/c
[Being goodwill brought in by the new partner.]
Hence, to Cash/Bank A/c, the amount is debited, when a new partner bring his share of goodwill in cash.