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When a new partner brings goodwill in CASH, the journal entry typically is
ADebit Old Partners; Credit Cash
BDebit Cash; Credit New Partner's Capital A/c
CDebit Cash; Credit old partners' Capital A/cs in sacrificing ratio (premium for goodwill)
DDebit Goodwill A/c; Credit Cash
Answer & Solution
Correct answer: C. Debit Cash; Credit old partners' Capital A/cs in sacrificing ratio (premium for goodwill)
Cash is debited; the premium for goodwill is credited to the sacrificing partners' capital accounts in the sacrificing ratio. Goodwill is NOT brought into the books as an asset (per AS-26).
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