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.