When a new partner is admitted into the firm, this marks the end of the old partnership and the beginning of a new one. The new partner will have to bring in the capital that is due from him as per the agreement and also pay for a share of the goodwill.
Goodwill is credited to the partner’s account (only the old) and is again written off by debiting the partner’s account (inclusive of the new one in the new Profit Sharing Ratio). If the admission is taking place part way through the financial period, then the new partner will be entitled to the profits or losses for the remaining part of the financial period. (i.e from the point of joining the partnership). Care should be taken when apportioning interest on capital, salaries and profits because of the changes.
