Practicing Success
Practicing Success
CUET Preparation Today
| Goodwill is recorded in the books when: |
Super Profit is earned by a business Money or Money's Worth is paid for acquiring goodwill Management decides to value the goodwill All of above |
| Money or Money's Worth is paid for acquiring goodwill |
| As per AS 26 only purchase goodwill will be recorded in book of accounts When goodwill is purchase by the firm in a consideration in cash or kinds of cash it shown in the balance sheet. As per Accounting Standard 26: (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. In line with what is prescribed by the Accounting Standard, goodwill appearing in the balance sheet in written off at the time of firm's reconstitution. (b) Self - generated goodwill is not accounted for in the books and shown as an asset. Thus if self generated goodwill be debited to goodwill account it should be written - off in the same financial year and should not be shown as an asset in the balance sheet. Alternatively value of goodwill may be adjusted by deducting new partners' current account and crediting in their sacrificing ratio. The effect under both the methods is same. |
