Goodwill can be introduced when

Explanation

When a new partner joins, they often pay extra for the privilege of joining an established business. This payment recognizes the partnership’s reputation, customer base, and earning power. This is goodwill.

Super profits might indicate goodwill exists, but don’t create the accounting entry. Business expansion or losses don’t directly cause goodwill to be recorded in partnership books.

Key point: Goodwill is formally recorded when ownership changes, like admitting new partners or selling the business.