Question : A and B are partners in a firm. Their balance sheet as at 31 st March, 2018 was as follows:

Liabilities	Rs.	Assets	Rs.
Provision for Doubtful Debts	4,000	Cash	10,000
Workmen Compensation Reserve	5,600	Sundry Debtors	80,000
Outstanding Expenses	3,000	Stock	20,000
Creditors	30,000	Fixed Assets	38,600
Capitals		Profit & Loss A/c	4,000
A	50,000
B	60,000
	1,52,600		1,52,600

C was taken into partnership as from 1st April, 2018. C brought Rs.40,000 as his capital but he is unable to bring any amount for goodwill. New profit sharing ratio is 3: 2: 1. Following terms were agreed upon :
1. Claim on account of Workmen's Compensation is Rs.3,000.
2. To write off Bad Debts amounting to Rs.6,000.
3. Creditors are to be paid Rs.2,000 more.
4. Rs.2,000 be provided for an unforeseen liability.
5. Outstanding expenses be brought down to Rs. 1,200.
6. Goodwill is valued at $1 \frac{1}{2}$ year's purchase of the average profits of last three years. Profits of 3 years amounted to Rs.8,000; Rs. 10,000 and Rs. 18,000 .
Question:
Which account will be debited and crediting in Respect of treatment of goodwill.

Option 1: premium for goodwill debiting Rs 3,000 and Crediting B's capital account by Rs 3,000

Option 2: debiting C's current account Rs 3,000 and crediting B's capital account with Rs 3,000

Option 3: debiting Cs current account Rs 3,000 and crediting B and A Rs 1,500 each

Option 4: None of the above

Team Careers360 9th Jan, 2024