Match each partnership goodwill scenario upon the admission of a new partner with its correct accounting entry treatment in the ledger books.
- Goodwill is raised at full value in the books of the existing partners before admitting a new partner.Debit Goodwill Account; Credit Old Partners' Capital Accounts in old profit-sharing ratio.
- Goodwill created in the books is subsequently fully written off by all partners.Debit All Partners' Capital Accounts in new profit-sharing ratio; Credit Goodwill Account.
- The incoming partner pays a premium for goodwill directly to existing partners privately.No journal entry is recorded in the firm's books of account.
- Goodwill is adjusted strictly through partner capital accounts without opening a goodwill account.Debit New Partner's Capital Account with their share; Credit Old Partners' Capital Accounts in sacrificing ratio.
Answer
1. Raising goodwill at full value matches with 'Debit Goodwill Account; Credit Old Partners' Capital Accounts in old profit-sharing ratio.' 2. Writing off goodwill matches with 'Debit All Partners' Capital Accounts in new profit-sharing ratio; Credit Goodwill Account.' 3. Premium paid privately matches with 'No journal entry is recorded in the firm's books of account.' 4. Adjusting goodwill through capital accounts matches with 'Debit New Partner's Capital Account with their share; Credit Old Partners' Capital Accounts in sacrificing ratio.'
Each scenario reflects standard partnership accounting rules under JAMB UTME guidelines: raising goodwill credits old partners in the old ratio, writing off debits all partners in the new ratio, private transactions require no book entries, and direct capital adjustments debit the incoming partner while crediting sacrificing partners.
Step-by-Step Solution
Key Concept
Accounting Treatment of Goodwill on Partner Admission