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When a new partner brings the goodwill premium in cash on admission, in which ratio is it credited to the capital accounts of the old partners?

Answer and explanation

Correct answer: Sacrificing ratio

The incoming partner pays premium for the share of future profits received. Therefore, goodwill premium is credited to old partners in their sacrificing ratio, not their old or new ratio. Exam tip: credit only the partners who sacrifice profit share.

Related tags

Partnership AccountsGoodwillAdmission Of PartnerSacrificing RatioGoodwill PremiumPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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