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Explain the concept of goodwill and its treatment

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Question - A new partner has joined the business during the year and has paid in £10,000 for 'goodwill'. This £10,000 has been credited by the bookkeeper to the account of the new partner. The senior partner had objected to this, but the bookkeeper had replied: 'Why not credit the £10,000 to the account of the new partner? It is his money after all.'

Required - Explain the concept of Goodwill and its treatment on admission of a new partner. In addition, examine critically the issue raised by the senior partner and give your reasons whether you support his claim. If you agree with his claim then, provide the correct entries according to you.

Reference no: EM133059830

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