Admission of Partner – When the goodwill account is not appearing in the books

When the goodwill account is not appearing in the books. There can be several alternatives.

(i) The new partner may bring cash for his share of goodwill. The amount so brought in by the new partner will be credited to the old partners in the ratio in which they sacrifice on admission of the new partner.

Alternatively, the amount brought in cash for goodwill by the new partner be credited to the goodwill account. It may then be transferred to old partners’ capital accounts in the sacrificing ratio. However, thc method is not preferable to one discussed above.

Another alternative could be to credit the new partner’s capital account with the bash brought in by him for capital and goodwill. A goodwill account is raised in the books with full value and the amount is credited to the old partners in the old profit sharing ratio. The goodwill account is then written off to all partners in the new profit sharing ratio.