In which circumstances Goodwill is valued in firm.
Answers
Answer:
There are various circumstances when it may be necessary to value goodwill. Some of the circumstances are:
(1) In the case of a partnership, when there is an admission, retirement, death or amalgamation, or a change in the profit sharing ratio take place, valuation of goodwill becomes necessary.
ANSWER :
★ According to C. L. Woelfel, "Goodwill is the superior earning power of a business beyond the earning power that would be expected of a firm in a similar business and with a similar amount of other assets. Goodwill includes excess power that can be attributed to such factors as the location of the business, good relations with customers and employees and managerial efficiency".
In case of a partnership business, the need of helping the goodwill and its treatment in the books of account arises in the following circumstances :↦
- ✎ When there is a scenes in profit sharing ratio of the existing partners.
- ✎ On the admission of a new partner in the partnership firm.
- ✎ On the retirement of a partner from the partnership firm.
- ✎ On the death of a partner of the partnership firm.
- ✎ When two or more firms are amalgamated.
- ✎ When the partnership business is dissolved.
- ✎ When the partnership business is sold to another party.
- ✎ When the partnership firm is converted into a limited company.