Question

When goodwill is paid privately, no entry in the books of account is required. (State True or False)

Answer 1

FALSE...

GOODWILL IS AN INTANGIBLE ASSET

OF BUSINESS..

THEREFORE ENTRY WILL BE REQUIRED.

Answer 2

The statement that when a goodwill is paid privately, no entry is required in the books of accounts is True.

• Goodwill comes when an entire business is acquired by a company. The amount of goodwill is the cost of buying the business minus the tangible assets ' fair market value, the intangible assets that can be identified, and the liabilities obtained in the purchase.
• Under the premium method, the existing partners share it in the sacrificing ratio when the incoming partner brings his share of goodwill in cash. However, when the amount of goodwill is paid in cash by the new partner privately to old partners, no entry will be passed in the company's books.