Goodwill is an intangible asset that belongs to the old partners at the time of admission of a new partner. On admission, adjustments must be made in the capital accounts of old partners for goodwill so that the new partner does not acquire a share in profits earned due to goodwill before admission without making payment. The various methods for treatment of goodwill on admission are as follows:

1. When the new partner brings goodwill in cash through the firm: The amount of premium brought by the new partner is shared by existing partners in their sacrificing ratio. The journal entries passed are: (i) Bank A/c Dr. To Premium for Goodwill A/c (ii) Premium for Goodwill A/c Dr. To Sacrificing Partners' Capital A/c (Individually)

2. When goodwill is credited to new partner's capital first: Alternatively, the amount is credited to the new partner's capital account and then adjusted in favour of existing partners in their sacrificing ratio: (i) Bank A/c Dr. To New Partner's Capital A/c (ii) New Partner's Capital A/c Dr. To Sacrificing Partners' Capital A/c (Individually)

3. When the new partner brings goodwill privately: If the amount is paid to old partners directly (privately) by the new partner, no entry is passed in the books of the firm.

4. When the new partner fails to bring goodwill in cash: The new partner's capital account is debited and sacrificing partners' capital accounts are credited in their sacrificing ratio: New Partner's Capital A/c Dr. To Sacrificing Partners' Capital A/c (Individually)

5. Withdrawal of goodwill amount: If partners decide to withdraw the amount of goodwill credited to their capital accounts, the following additional entry is passed: Existing Partner's Capital A/c (Individually) Dr. To Bank A/c