When a new partner brings his share of goodwill in cash, the amount is credited to:

When a new partner brings his share of goodwill in cash, the journal entry recorded is:

Cash/Bank A/c ... Dr

To Premium for Goodwill A/c

Since cash is coming into the business, Cash/Bank Account is debited. The corresponding credit entry goes to Premium for Goodwill Account.

The Premium for Goodwill Account is a temporary account that holds the goodwill amount brought by the new partner. This amount represents compensation to the existing partners for sacrificing their share in the firm's future profits.

Subsequently, this Premium for Goodwill Account is transferred to the capital accounts of old partners in their sacrificing ratio through another entry:

Premium for Goodwill A/c ... Dr

To Old Partners' Capital A/c (in sacrificing ratio)

Important distinction: The goodwill brought in cash by the new partner is not credited to the new partner's capital account. The new partner's capital account is credited separately only for his capital contribution (excluding goodwill). The goodwill premium belongs to the old partners as they are giving up a portion of their profit-sharing rights to accommodate the new partner.

Therefore, the correct answer is Option 1: Premium for goodwill account.