Question

When goodwill is not purchased goodwill account can ______.

Options

• Never be raised in the books.

• Be raised in the books.

• Be partially raised in the books.

• Be raised as per the agreement of the partners.

Answer 1

When goodwill is not purchased goodwill account can never be raised in the books.

Explanation:

According to Accounting Standard-26 (AS-26) on Intangible Assets, goodwill can be recorded in the books only when it is purchased (i.e., when consideration is paid for it). If goodwill is internally generated (not purchased), it should not be recognized as an asset in the books of accounts.