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Why do we write goodwill when …

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Why do we write goodwill when in opening entry liabilities are more than assets ?

Posted by Riya Trivedi 8 years, 7 months ago

CBSE > Class 11 > Accountancy

1 answers

Manisha Jhingran 8 years, 7 months ago

Because, as per accounting equation concept and dual aspect concept, our total liabilities must be equal to total assets, Now in opening entry, if total liabilities stand higher than total assets, it indicates some more asset should be there, which is taken to be goodwill.

Alternatively put, a business may be able to avail more credit beacuse of tghe name, fame and image (goodwill) it has developed for itself in the market.

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