Question

Which of the following is not accounted for in the books and shown as an asset?

• A. Purchased Goodwill
• B. Self generated Goodwill
• C. Purchased Assets
• D. Borrowed Assets

Hint:

Goodwill created by the firm itself has no cost, so it is not recorded.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
Goodwill is the extra value a firm earns because of its good name, location and customers. An asset is recorded in the books only when it has a measurable cost. The question asks which item is not recorded and not shown as an asset.

Step 2: Check option 1, Purchased Goodwill:
When a firm pays money to buy goodwill, the price paid is a real cost. It is recorded in the books and shown as an intangible asset. So option 1 is wrong.

Step 3: Check option 2, Self generated Goodwill:
Goodwill built up by the firm over time has no measurable cost. Accounting Standard 26 does not allow it to be recorded. It is never shown as an asset. So option 2 is correct.

Step 4: Check option 3, Purchased Assets:
Assets bought by the firm carry a cost. They are recorded and shown on the asset side. So option 3 is wrong.

Step 5: Check option 4, Borrowed Assets:
Borrowed assets are recorded through the loan taken, and what the firm holds is recorded in its books. So option 4 is not the answer.

Final Answer:
Only self generated goodwill has no cost, so it is not recorded or shown as an asset. The answer is option 2. \[ \boxed{2} \]