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What is Goodwill? Video Lecture | Accountancy Class 12 - Commerce

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FAQs on What is Goodwill? Video Lecture - Accountancy Class 12 - Commerce

1. What is goodwill in commerce?
Ans. Goodwill in commerce refers to the intangible value of a business or brand that goes beyond its physical assets. It represents the reputation, customer loyalty, brand recognition, and other non-quantifiable factors that contribute to the business's value.
2. How is goodwill calculated?
Ans. Goodwill is calculated by subtracting the fair market value of a business's tangible assets and liabilities from the total purchase price. The remaining amount represents the estimated value of the business's intangible assets, which includes goodwill.
3. Why is goodwill important in business?
Ans. Goodwill is important in business as it enhances a company's reputation and customer loyalty, which can lead to increased sales and profitability. It also plays a crucial role in mergers and acquisitions, where the value of a company's goodwill can significantly influence the purchase price.
4. Can goodwill be sold or transferred?
Ans. Yes, goodwill can be sold or transferred from one business to another. In the case of a merger or acquisition, the acquiring company purchases the goodwill along with the other assets of the business. Goodwill can also be sold independently, but it is subject to negotiation and valuation.
5. How is goodwill recorded in financial statements?
Ans. Goodwill is recorded as an intangible asset on a company's balance sheet. It is typically listed separately from other tangible assets and is subject to periodic impairment tests to ensure its value is not overstated. Any decrease in the value of goodwill is reflected as an impairment loss on the company's income statement.
49 videos|111 docs|56 tests

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