Why goodwill is an intangible asset but not fictitious asset?

Question

Answer

Goodwill is considered as an intangible asset of the firm. It does not have any physical existence. It just has a capability to help the business in earning more and more profits. On the other hand, fictitious assets are neither tangible nor intangible assets. They are the expenses or losses which are still to be charged (debited) from the profit.

Answer

Goodwill as an Intangible Asset

Goodwill is an intangible asset because it cannot be physically touched, seen, or measured. It is a non-physical asset that represents the value of a company based on its reputation, customer loyalty, and brand recognition. Goodwill is recorded on a company's balance sheet as an intangible asset and is considered to be one of the most valuable assets that a company can possess.

Why Goodwill is Not a Fictitious Asset

Fictitious assets are assets that do not have any real value or substance. They are created by accounting entries and do not represent any tangible or intangible asset. Goodwill is not a fictitious asset for the following reasons:

Goodwill is based on real factors: Goodwill is based on a company's real factors such as its reputation, customer loyalty, and brand recognition. These factors are not created by accounting entries but are the result of a company's business operations over time.

Goodwill is recognized through acquisition: Goodwill is recognized when a company acquires another company for an amount that is greater than the fair value of the net assets acquired. This excess value represents the goodwill of the acquired company and is recognized as an intangible asset.

Goodwill has a value: Goodwill has a real value that can be measured by the amount that a company is willing to pay for it. This value is based on the future earnings potential of a company and its ability to generate cash flows.

Conclusion

Goodwill is an intangible asset because it represents the value of a company's reputation, customer loyalty, and brand recognition. It is not a fictitious asset because it is based on real factors, recognized through acquisition, and has a measurable value. Goodwill is a valuable asset that can contribute significantly to a company's success and should be managed carefully to maintain its value.

Answer

Fictitious assets can also be understood as deffered revenue expenditure. their benefits are carried forward in the years to come like advertisement expenditure. another important property of fictitious assets us that they HAVE NO SELLABLE OR MARKET VALUE. however, goodwill can be sold and purchased so it is not a fictitious asset.
on the other hand it cannot be seen or touched and hence it is an intangible asset.

Answer

Goodwill is an intangible asset because it have not any physical firm and we can't see and touched it . we can't share them physically it's means by touch but  we can  pay this asset  . we can used it (Goodwill) so this is not fictitious asset.

Similar Commerce Doubts

Why is goodwill considered as an intangible asset but not a fictitious asset ?

Why is 'goodwill' considered an 'intangible asset' but not a 'fictitious'?(acc ch-3)?

Goodwill is not a ……..

Why good will considered as intangible asset but not fictitious asset???

According to me Goodwill,patent,trademark is a intangible asset but in bcom entrance exam book it is given fictious asset.which answer is correct?

Top Courses for CommerceView all

Chapter Notes for Commerce

Economics Class 12

Economics Class 11

NCERT Books & Solutions for Commerce

Economics for CBSE Class 12 Board Examinations

Top Courses for Commerce

Top Courses for Commerce

Suggested Free Tests

Related Content

Commerce Courses

Other Courses

How To Prepare?

Related Exams

Company