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A premium of ₹16,000 received from the new partner is deposited into the bank and the entire amount is withdrawn immediately. What will be the net effect on the Bank account?

Answer and explanation

Correct answer: Zero

Depositing the premium increases the Bank balance by ₹16,000, while withdrawing the entire amount decreases it by ₹16,000. Therefore, the net effect is ₹16,000 − ₹16,000 = zero. Exam tip: Record the deposit and withdrawal separately, then calculate their net effect on the Bank account.

Related tags

Goodwill AccountingAdmission Of PartnerBank AccountNet EffectReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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