When a new partner is admitted to a partnership by purchasing an existing partner's interests, the journal does not record the transfer of cash from the new partner to the existing partner.

Question

Quizplus · Accepted Answer

The purchase of a partner's interest by a new partner does not involve the transfer of cash between the two parties. Rather, the new partner pays the partnership for their share of the interest, and the partnership then pays the existing partner for their share. This is typically recorded in journal entries that reflect the change in the ownership structure of the partnership.

When a New Partner Is Admitted to a Partnership by Purchasing