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JAMB Principles of Accounts 2013 Question 33

Question 33

Partnership Admission, Retirement and Dissolution

The amount paid by the new partner on admission as a compensation for the reputation built up by old partners is a

  1. A.bonus.
  2. B.commission.
  3. C.premium.
  4. D.goodwill.
Show the answer and explanation

Answer: D (goodwill.)

Explanation

Goodwill is the value of the firm's reputation, which a new partner pays the old partners for.