Question : When goodwill is not a purchased goodwill, Goodwill
Option 1: Is not recognized in the books of account
Option 2: Is recognized in the books of account
Option 3: May or may not be recognized in the books of account
Option 4: Is partly recognized in the books of account
Correct Answer: Is not recognized in the books of account
Solution : Answer = Is not recognized in the books of account.
When goodwill is not purchased, it is not recognized in the books of account. Purchased goodwill arises from the acquisition of another company at a price higher than the fair value of its identifiable assets and liabilities. In contrast, internally generated goodwill is not recognized in the books. Only purchased goodwill is recognized in the books of the account.
Hence, the correct option is 1.
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