Goodwill is recorded in the books when:Money or money's worth is paid acquiring goodwill.Super profit is earned by the enterprise.Management of the enterprise decides to record goodwill.Any of the above. (2024)
You visited us 0 times! Enjoying our articles? Unlock Full Access!
Money or money's worth is paid for acquiring goodwill.
Open in App
Solution
Verified by Toppr
Goodwill - It is the value of reputation of a firm in respect of profits expected in future over and above the normal rate of profits. As per the provisions of accounting standard 26, goodwill is recorded in books only when the goodwill is purchased during business purchase. it means money or money's worth should be paid for acquiring goodwill to record it in books.
If the acquiring company pays less than the target's book value, it gains negative goodwill. This means that it purchased the company at a bargain in a distress sale. Goodwill is recorded as an intangible asset on the acquiring company's balance sheet under the long-term assets account.
Self-generated goodwill is not accounted in the books of acccount because consideration in money or money's worth is not paid for it. According to AS-26, Intangible Assets only Purchased Goodwill should be accounted in the books of account.
Answer and Explanation: Goodwill is only recorded when it is purchased in the books of accounts. Self-generated goodwill does not qualify to record in the books of accounts.
Introduction: My name is Van Hayes, I am a thankful, friendly, smiling, calm, powerful, fine, enthusiastic person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
