Is Goodwill Depreciated?

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Solution

Goodwill, being an intangible asset, is not depreciated instead it is amortized over a period of time.

Also read:

Also read:

Methods of Valuation of Goodwill

Why Do We Debit Goodwill Account While Distributing It Amongst Old Partners

Treatment of Goodwill

MCQs on Goodwill

Intangible Assets

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What is goodwill? What are the factors that effect goodwill?

Q. State 'True' or 'False'

When goodwill is written off, goodwill amount is debited.

Q. Rajesh and Ravi are partners sharing profits in the ratio of 3: 2 . Their Balance Sheet at 31st March , 2018 stood as:

BALANCE SHEET as at 31st March, 2018
Liabilities		₹	Assets		₹
Creditors		38,500	Cash		2,000
Outstanding Rent		4,000	Stock		15,000
Capital A/cs:			Prepaid Insurance		1,500
			Debtors	9,400
			Less : Provision for D.D.	400	9,000
Rajesh	29,000
Ravi	15,000	44,000
			Machinery		19,000
			Building		35,000
			Furniture		5,000
		86,500			86,500

Raman is admitted as a new partner introducing a capital of ₹ 16,000. The new profit-sharing ratio is decided as 5 : 3 : 2 . Raman is unable to bring in any cash for goodwill . So it is decided to value the goodwill on the basis of Raman's share in the profits and the capital contributed by him. Following revaluation s are made
(a) Stock to depreciate by 5% ;
(b) Provision for Doubtful Debts is to be ₹ 500;
(c) Furniture to depreciate by 10% ;
(d) Building is valued at ₹ 40,000.
Show necessary Ledger Accounts and Balance Sheet of new firm.

Q. State 'True' or 'False'

If the goodwill account raised up, goodwill account is debited.

Q. Classify the following into Assets, Liabilities, Capital, Expenses and Revenue:

(i) Land;	(ii) Investments;	(iii) Building;	(iv) Interest Received;
(v) Salary;	(vi) Bank Overdraft;	(vii) Debtors;	(viii) Creditors;
(ix) Bad Debts;	(x) Capital;	(xi) Depreciation;	(xii) Motor Vehicles;
(xiii) Freight;	(xiv) Wages;	(xv) Goodwill;	(xvi) Repairs.

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