accountancy goodwill chapter

goodwill

goodwill is an intanngible asset which places an enterprise to an advantage to earn higher than normal profits.

tangible assests

physical items that have monetary value and can be seen or touched, such as machinery, buildings, and inventory.

intangible assets

non-physical assets that provide value to a company, including goodwill, patents, and trademarks.

nature of goodwill

Goodwill represents the value derived from a company's reputation, customer relationships, and brand recognition, leading to potential future earnings.

types of goodwill

purchased goodwill,self-generated goodwill

aS-26 intangible assets

issued by ICAI

FICTIOUS ASSETS

fictious assets neither have physical existsance nor realisable value

when is goodwill valued

gw is valued when: the profit sharing ratio changes, a partner is admited,dies or retires, when 2 firms amagalate, the firm is sold, a firm is converted to a company

purchased goodwill

Purchased goodwill is the goodwill acquired by an enterprise for which a consideration (cash or kind) is paid. It arises on the purchase of a business when the purchase price exceeds the net assets acquired.

self generated goodwill

Self-generated goodwill (also known as inherent goodwill) is an internally generated asset that arises over time due to an enterprise's reputation, quality of products, favorable location, and efficient management

simple average profit method

average normal business profit x no of years of purchase

normal bs profit also termed as?

future maintainable profit

number of years of purchase

The estimated period a business expects to earn profits attributable to past efforts

avg busines pft

total/no

goodwill simple avg method

normal bs profit x no of years of purchase

weighted avg method bs pft

weighted normal bs profit/ no

weighted goodwill

weighted bs pft x no of years of purchase