When an existing partner sells interest in the partnership and Goodwill is recognized, what is the likely entry made:

Question

Quizplus · Accepted Answer

When a partner sells their interest in a partnership and Goodwill is recognized, the entry would typically involve debiting the Capital account, as this represents the partner's ownership in the partnership. There would also likely be a credit to Cash or Accounts Receivable, depending on the payment structure of the sale. Expensing or debiting the selling partner's drawing account would not be appropriate as this is a personal account for the partner and does not affect the partnership's financial statements.

When an Existing Partner Sells Interest in the Partnership and Goodwill