In a partnership, goodwill is allocated to the old partners in their profit and loss sharing ratio when a new partner is admitted.
When a new partner is admitted into a partnership and the old partners' goodwill is recognized, the goodwill is typically allocated to the old partners in their profit and loss sharing ratio. This is because the goodwill that exists has been built up by the efforts and reputation of the existing partners, and it is recognized as an intangible asset of the business. When the new partner comes in, they typically bring in capital or assets to compensate the existing partners for a share of that goodwill, effectively purchasing a portion of it.