Goodwill

Goodwill is the intangible asset of the firm which is calculated by avg profit method and super profit method but here in this article we will not discuss how to calculate goodwill but we will discuss how to treat the goodwill

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• When goodwill appear in old balance sheet of firm.

When goodwill appear in the old balance sheet of the firm then there are chances that the value of goodwill may increase or decrease

• If value of goodwill increases.

If there is an increase in the value of goodwill then there there are two ways you can show this adjustment i will show you the easy and right way to do so Note:With this method your revaluation profit or loss may not match with your book answer but the telly amount will match which is an indication that the sum is right

The adjustment will say the goodwill is increased to a perticular amount when old goodwill is given in balance sheet then

Suppose the old balance sheet goodwill is 70000. And in adjustment they say goodwill is revuled to 100000 then. 100000-70000=30000 so we will increase 30000 in the balance sheet goodwill and pass the entries in goodwill a/c as. Goodwill a/c. Dr. To revaluation a/c

Similarly if there is decrease in the value of goodwill then you have to decrease 30000 from balance sheet goodwill and post it to outer column and its effect will be revaluation a/c Dr To goodwill a/c