Premium on goodwill

Atharv Sankliya (1113 Points)

07 February 2023

how partner record the premium on goodwill paid to firm in his personal balance sheet??

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Elisa (na) (20 Points)
Replied 08 February 2023

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.

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Yasaswi Gomes (1959 Points)
Replied 08 February 2023

Is it partnership? That's bull crap to me in Indas. Without a premium, you buy a company, it's expensed. Everything is a premium over net identifiable assets. Bargain purchase is expensed and a premium paid is capitalised.