If the premium for goodwill is paid to the old partners directly / privately by the new partner, what journal entry will be recorded in the books of Partnership Firm :-
- ACash / Bank A/c Dr. To Premium for Goodwill A/c
- BPremium for Goodwill A/c Dr. To Sacrificing Partners' Capital A/c
- CCash / Bank A/c Dr. and Premium for Goodwill A/c Dr. To Sacrificing Partners' Capital A/c
- DNo journal entry is recorded.
Solution & Step-by-step Explanation
When a new partner pays premium for goodwill directly or privately to the old/sacrificing partners outside the business setup, the transaction takes place outside the firm's accounts. Hence, no journal entry is recorded in the books of the partnership firm.