Question

Which of the following is true in relation to goodwill?

Options

• Goodwill is a fictitious asset.

• Goodwill is a current asset.

• Goodwill is a wasting asset.

• Goodwill is an intangible asset.

Answer 1

Goodwill is an intangible asset.

Explanation:

• Not a fictitious asset: Fictitious assets are losses not written off (like Preliminary Expenses), but goodwill represents future economic benefits.
• Not a current asset: Goodwill cannot be converted into cash quickly; it is not held for short-term trading.
• Not a wasting asset: Wasting assets lose value due to physical use (like mines, patents with fixed life). Goodwill does not “waste” in this sense, though it may fluctuate.
• Goodwill is an intangible asset: It has no physical form but provides value to the business (brand name, reputation, customer loyalty).