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Give accounting treatments for goodwill of different circumstances when firm goes for dissolution. |
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Answer» Following are the accounting treatments for goodwill of different circumstances when firm goes for dissolution : (1) If the value of goodwill will be shown in the balance sheet then like other assets, goodwill will be shown as debit side of Realisation Account. (2) Amount realised from the sale of goodwill will be shown on credit side of Realisation Account. (3) If no information regarding realisation of goodwill is given then it is to be understood that nothing is realised. (4) At the time of dissolution of firm, if goodwill is not shown in the books of account, hence amount realised • then it will be treated as profit and credited to Realisation Account. (5) When any partner purchase whole business (including goodwill) then (i) Capital account of business purchase partner is debited by amount of goodwill and (ii) Realisation account is credited by amount of goodwill. |
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