This MCQ Test on the meaning of Goodwill has 20 practice questions. Test your knowledge about the partnership accounts - meaning of goodwill, factors affecting goodwill like product quality, patents, large and favorable contracts, after sales service, quality of management , difference between purchased goodwill and self generated goodwill, AS 26 , goodwill amortised , whether goodwill to be accounted in books of accounts etc. The quiz suits well for conceptual clarity for your board exams
CBSE class 12 accountancy MCQ questions
The below MCQ test is designed as per the latest syllabus prescribed by CBSE board. With the rise in weightage of MCQ questions, the practice of MCQ questions becomes very important. The quiz is equally useful for students of CUET exams.
How to attempt the quiz
One by one go through the below questions and select the right option. Do all the questions and in the end press submit. Instantly you will get your score and the explanation against each question. Go through your mistakes and reattempt the quiz any number of times as needed.
MCQ Quiz - Practice Questions
MCQ Quiz
Question 1
What does "Goodwill" primarily mean?
B
Correct Answer: A good opinion about someone or something.
Goodwill is defined as having a good opinion about someone/some business/something, or good reputation.
Question 2
Which of the following best describes the nature of Goodwill as an asset?
B
Correct Answer: Intangible and helps generate sales.
Goodwill is an intangible asset as it cannot be seen and touched, and it attracts customers, helping generate higher sales and good profits.
Question 3
Which characteristic is true for an intangible asset like Goodwill?
C
Correct Answer: It does not have a physical form.
Intangible assets do not have a physical form and cannot be seen and touched.
Question 4
How does Goodwill benefit a business?
C
Correct Answer: By attracting customers and helping generate higher sales and profits.
Goodwill attracts customers, helps generate higher sales and good profits.
Question 5
In school, what contributes to the formation of "Goodwill" in the mind of teachers regarding certain students?
B
Correct Answer: Fulfilling teacher expectations and good discipline.
Goodwill forms in the teacher's mind because some students fulfill teacher expectations (e.g., scoring good marks), show good discipline, participate in ECA, do timely homework, and help fellow students.
Question 6
What type of Goodwill is generated by a business's own efforts and typically does not involve any payment?
B
Correct Answer: Self Generated Goodwill.
Self Generated Goodwill is generated by self efforts and no money is paid for this kind of goodwill.
Question 7
Which type of Goodwill is entered into the Books of Accounts because it arises from a financial transaction?
C
Correct Answer: Purchased Goodwill.
Purchased Goodwill is acquired by making payment and is entered in Books of accounts because it gives rise to a financial transaction.
Question 8
If Goodwill is present on the asset side of a company's Balance Sheet, what type of Goodwill is it ?
C
Correct Answer: Purchased Goodwill.
If there is Goodwill in Balance Sheet on assets side, then it is a purchased Goodwill.
Question 9
Why is Self Generated Goodwill generally not recorded in the books of accounts?
B
Correct Answer: Because there is no financial transaction involved.
Self Generated Goodwill is not entered in the books of accounts as there is no financial transaction.
Question 10
What is the fundamental definition of an asset for a business?
B
Correct Answer: Things that help a business earn profits and generate sales.
Assets are those things which help business earn profits and generate sales.
Question 11
Which of the following is an example of a tangible asset ?
C
Correct Answer: Machinery.
Machinery, Building, Vehicles, Stock, and Computers are examples of tangible assets.
Question 12
Why is it difficult to determine the value of self-generated Goodwill?
B
Correct Answer: Because it is not purchased from anywhere.
Self generated Goodwill is difficult to value because it is not purchased from anywhere and hence no money is paid for it.
Question 13
The valuation of Goodwill is considered "subjective." What does this mean?
B
Correct Answer: Personal opinions can impact the decisions or values chosen.
Subjective means where personal opinions impact the decisions or actions chosen. Goodwill valuation is subjective because using different methods will result in different values.
Question 14
Which of the following is a method for the valuation of Goodwill?
C
Correct Answer: Average Profit method.
Average Profit method, Super Profit method, and Capitalization method are methods for Valuation of Goodwill.
Question 15
Which factor mentioned here positively affects a business's Goodwill?
B
Correct Answer: Good behaviour with customers.
Good Business Practices, Good product, Reasonable Prices, and Good behaviour with customers are factors affecting Goodwill.
Question 16
Goodwill has a value which is generally realised whan a business is sold
A
Correct Answer: True
The statement is true. Goodwill has a value which is generally realised whan a business is sold.
Question 17
Which of the following does not positively affects Goodwill of a business
C
Correct Answer: unreasonable pricing
Unreasonable pricing does not positively affects goodwill. It actually negatively affects goodwill of a business
Question 18
When does a business needs to do goodwill valuation
D
Correct Answer: All of the above
Goodwill valuation needs to be done on a) change in profit sharing ratio b) admission of a new partner c) retirement of a partner d) death of a partner e) amalgamation of partnership firms f) firm is sold g) firm is converted into a company
Question 19
According to AS 26, Goodwill cannot be recognised in books of accounts unless
A
Correct Answer: consideration is paid for it
According to AS 26, Goodwill cannot be recognised in books of accounts unless some consideration is paid for it between knowledgeable persons at an arms length
Question 20
In the financial statements Goodwill is shown on
C
Correct Answer: Assets side of Balance Sheet
Goodwill is an intangible assets and is shown on assets side of the Balance sheet
