Accountancy Part AAdmission of a Partner

As per AS-26 assets like goodwill should be written off.

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → As early as possible but not exceeding its estimated life, which normally should not be beyond 10 years

AS-26 treats purchased goodwill as an intangible asset that must be written off as early as possible; where the write-off is spread over more than one year, the period should not exceed 10 years. Option (3) is the only one that states the full rule.

Option (1) As early as possible — Incorrect. True as far as it goes, but it leaves out the 10-year limit.

Option (2) As early as possible but not exceeding its estimated life — Incorrect. It still misses the rule that the period normally should not go beyond 10 years.

Option (4) Within the useful life of asset, irrespective of number of years. — Incorrect. "Irrespective of number of years" goes against the 10-year ceiling.

NCERT (2026-27 edition):
Applicability of Accounting Standard 26: Intangible Assets – “… (a) Purchased goodwill may be accounted for in the books and shown as an asset, where it is accounted for in the books and shown as assets, it should be written off as early as possible, but where it is to be written- off in more than one accounting year, it should be written off in a period not exceeding 10 years.”