— Kishore V, SME and ACW at Edumarz
Occasionally, the new partner fails to deliver his fair share of goodwill in the form of cash. The Goodwill account is updated through the former Partners’ Capital Account in such cases.
The new Partner’s Capital Account or Current Account is debited with his or her share of goodwill in this situation, and the old partners who sacrifice their share in favour In their sacrificial ratio, the new partner is credited. The following journal entry is recorded in the accounting records.
Particulars | L.F | Debit | Credit |
New Partner’s Capital A/c Dr To old Partner’s Capital A/c ( New partner’s capital accounts is debited with his share of goodwill and sacrificing partner’s capital account are credited in their sacrificing ratio ) | XXX | XXX |