Goodwill Flashcards
What is goodwill?
It is the difference between the value of the business as a whole and the net value of its assets and liabilities.
Is goodwill an asset?
Yes, an intangible asset.
What does goodwill refer to?
The reputation and customer base that has been established for a business.
When must you account for goodwill?
always, even if told it will not be maintained in the books of accounts.
What is the old profit sharing ratio recorded as on the goodwill account?
Goodwill created (debit as it is creating an asset)
What is the new profit sharing ratio recorded as on the goodwill account?
Goodwill eliminated (credit as it is reducing an asset)
What are the two ledgers?
Capital accounts and goodwill accounts
Where is goodwill eliminated on a capital account?
Debit side
Where is goodwill created on the capital account?
Credit side
