Chapter 3: Valuation of Goodwill
Let's learn more about goodwill and its various aspects!
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Details
Over a period of time, a well - established business develops an advantage of having a reputation and wide connections. These factors benefit the business.
In accounting, the monetary value of such advantage is known as 'Goodwill'. A firm having goodwill has the capacity to earn more profit than a common firm, and value of goodwill in turn depends on profit earning capacity of the firm.
So, we can say that goodwill doesn't exist for businesses that earn a normal amount of profit or incur loss.
Curriculum
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Goodwill Quiz7 questions
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What is goodwill?1 m
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What is revaluation of goodwill?1 m
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Which type of asset is goodwill ?1 m
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Under which head goodwill is shown in the balance sheet ?1 m
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What is capitalized profit?1 m
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What is super profit?1 m
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What is average profit ?1 m
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What is weighted average profit?1 m
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Practice Quiz17 questions
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1. Define Goodwill.1 m
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2. What is the base for the valuation of goodwill ?1 m
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3. Will the value of goodwill be more or less for a monopolistic type of business?1 m
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4. When is the valuation of goodwill necessary ?1 m
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5. While valuing goodwill by capitalization of average profit, which points are to be considered?1 m
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6. Which kind of business has goodwill value ?1 m
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7. What is super profit?1 m
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8. State the method for valuation of goodwill when profit of the last years has increasing trend?1 m
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9. State the methods for the valuation of goodwill.1 m
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10. State the factors affecting valuation of goodwill.1 m
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11. State the circumstances under which weighted average profit method of valuation of goodwill is used.1 m
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12. In balance sheet, goodwill is shown on which side and under which heading ?1 m
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13. In which type of business goodwill does not exist?1 m
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14. State the ‘other special benefits’ regarding factors affecting valuation of goodwill.1 m
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15. State the circumstances in which valuation of goodwill arises in case of partnership firm.1 m
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16. What is Capitalized profit ?1 m
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17. State the formula for Capitalized profit.1 m
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18. According to capitalized profit method, when can we day that ‘Business does not have goodwill’ ?1 m
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19. What is the nature of goodwill for business, which depends on the individual’s skills ?1 m
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20. What is expected rate of return ?1 m
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21. What is the nature of goodwill for a highly competitive business, and why?1 m
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22. State the demerits of simple average method of valuing the goodwill.1 m
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23. What is meant by average profit value based on expected rate of return ?1 m
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Chapter 3 Practice Material650 KB
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One Line Answer and Theory1.1 MB
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