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: Approach:
Test each item for one condition: can its cost be measured reliably? Only such items enter the books.

Step 2: Items with a measurable cost:
Purchased goodwill has a price paid. Purchased assets have a purchase price. Borrowed assets come with a loan amount and are recorded through it. All these are recorded.

Step 3: Item without a measurable cost:
Self generated goodwill comes from the firm's own reputation. No payment is made for it, so no cost exists. It fails the test and stays out of the books, as AS 26 says.

Step 4: Conclusion:
The item not accounted for and not shown as an asset is self generated goodwill, which is the second option.

Final Answer:
Self generated goodwill is the only item that fails the cost test. \[ \boxed{2} \]