Question

Is Goodwill is written in the Asset side of the balance sheet what its mean and how it will be treated?

Answer 1

Dear Student,

When goodwill appears on the Assets side of the balance sheet, it means the excess of the worth of the business over what can be computed from the net of its assets and liabilities. Usually, when a business is purchased for a value higher than the value of its assets, the excess value of business is known as the goodwill. It appears on the Assets side of the balance sheet as an intangible asset.

When, at the time of reconstitution of a partnership firm(admission, retirement, dissolution,etc), Goodwill appears on the assets side of the balance sheet, it is written off by debiting the old partners' capital accounts (in the case of fluctuating capitals) and current accounts (in the case of fixed capitals) in their old profit sharing ratio and crediting Goodwill a/c.

The journal entry would be:

Date	Particulars	L.f.	Amount Dr.	Amount Cr.
	Old partners' Capital/Current A/c Dr. To Goodwill a/c (Being goodwill existing in the books written off)

Regards