na
1220 Points
Joined August 2009
When a partner pays a premium for the purchase of goodwill in a partnership firm, the transaction would be recorded in their personal balance sheet as follows:
Debit: Cash (or Bank) account for the amount paid for the goodwill premium.
Credit: Investment in the partnership account for the amount paid for the goodwill premium.
This entry records the cash outflow from the partner's personal account and the corresponding increase in their investment in the partnership. The investment in the partnership account represents the partner's ownership interest in the firm, and the goodwill premium paid increases the value of that ownership interest.