Journal Entries of Goodwill

All type organisations have goodwill asset. It does not show physically but it has the value when we sell or buy any other business. When we buy another company, we have to pay extra amount of goodwill to vendor because vendor has done the same business before us and his reputation has some value because on his company name or his reputation, we can get unsecured loan. So, it is necessary to pass the journal entries of Goodwill.


Following are the main journal entries of Goodwill.

1. When company buys  the goodwill and pays the amount for goodwill

Sometime, vendor of company will demand excess value business than market value, difference will be goodwill. It is intangible asset but we have to record it by passing following journal entry.

Rule Debit : Goodwill will come in business. Everything which comes in business will be debit. Goodwill is asset. So, increase in asset of our business will be debit. So, Goodwill will also debit.

Rule Credit : Cash will go from our business. It will decrease in the amount of cash. So, cash will be credit.

For example, ABC has bought XYZ company. ABC has paid $ 5,00,000 for goodwill of XYZ company. Pass the journal entry.

Goodwill Account Debit   5,00,000

Cash Account Credit  5,00,000

Now, we will show this goodwill as our intangible asset in our balance sheet.

2. When Company Sells the Goodwill and Get the Amount for Goodwill 

It is not sure, you will get same amount of goodwill what is showing in your books or balance sheet because. Time is changing and if you have sold the goodwill also with your business, you can get excess or low amount of goodwill difference will be profit or loss on selling of goodwill.


Rule Debit : You have received the cash by selling goodwill. It will increase your cash asset, so it will be debit. If you get loss, it will be also debit because you loss will decrease your invested capital. Moreover all losses and expenses will always debit.

Rule Credit : Goodwill account will be credit because it will decrease the asset of goodwill. If company is gaining profit from sale of goodwill, it will also credit

For example : ABC company sold same XYZ after buying to MNO company at $ 6,00,000 but book value is same as $ 5,00,000. Pass the journal entry.

Cash Account Debit 6,00,000

Profit on Sale of Goodwill Account Credit 1,00,000

Goodwill Account Credit 5,00,000

3. When Goodwill will be Impair 

Goodwill is intangible asset, so we do not depreciate its value after spending of time. But if goodwill's book value is high but market value is low, it means, our goodwill's value has decreased. So, we have to written off by transferring it to profit and loss account's debit side.

Rule Debit : Loss of Goodwill impairment is the decrease in value of goodwill. It will be debit

 For example, we and our employees do not talk in sweet voice and properly. It will decrease our customer. Decrease in the customer will decrease our goodwill. For example, in day, we have just 1 customer but our competitor has 20,000 customers in day. We have started our business before our competitor. In past our sale was 20,000. Now, due to our bad behaviour, our goodwill value has decreased in the market. So, show this in balance sheet through journal entry.

Rule Credit : Goodwill account will credit because our asset will decrease due to loss in its value.

Loss of Goodwill Impairment Account Debit

Goodwill Account Credit


If you are not in hurry, read whole list of journal entries.

COMMENTS

Comments on this Website: 1
Loading...
.
Share above Content to Your Friends



Name

access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting interest international Internet Introduction of Tally 9 inventory investment invoice IT Japan Job costing journal entries Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting otcei pakistan parents pay pal pdf pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
false
ltr
item
Accounting Education: Journal Entries of Goodwill
Journal Entries of Goodwill
http://1.bp.blogspot.com/-SoEE6Da7FOs/U3Wr5ypn-cI/AAAAAAAANqY/2TsQM4e2RmA/s1600/goodwill+entrie.PNG
http://1.bp.blogspot.com/-SoEE6Da7FOs/U3Wr5ypn-cI/AAAAAAAANqY/2TsQM4e2RmA/s72-c/goodwill+entrie.PNG
Accounting Education
http://www.svtuition.org/2014/05/journal-entries-of-goodwill.html
http://www.svtuition.org/
http://www.svtuition.org/
http://www.svtuition.org/2014/05/journal-entries-of-goodwill.html
true
2410664366776677676
UTF-8
Not found any lecture VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at vinod@svtuition.org for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock