This MCQ Test on the meaning of Goodwill has 15 practice questions. Test your knowledge about the partnership accounts - meaning of goodwill, factors affecting goodwill, purchased and self generated goodwill 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
Goodwill is classified as which type of asset?
A
Correct Answer: Intangible Asset
Goodwill is an intangible asset as it does not have physical existence but has value.
Question 2
Goodwill represents the present value of:
C
Correct Answer: Expected future super profits
Goodwill is the present value of expected future profits that are more than normal return on investment.
Question 3
Which of the following is an example of tangible asset?
B
Correct Answer: Building
Tangible assets have physical existence and can be seen and touched. Building is a tangible asset.
Question 4
Self-generated goodwill is:
D
Correct Answer: Not recognised in books of account
As per AS-26, self-generated goodwill is not recognised in books as its value is subjective and no consideration is paid.
Question 5
Which factor does NOT affect the value of goodwill?
A
Correct Answer: Color of office walls
Factors affecting goodwill include management efficiency, location, quality, contracts, etc. Office wall color does not affect goodwill.
Question 6
Fictitious assets are:
C
Correct Answer: Expenses shown on asset side till written off
Fictitious assets are expenses (like preliminary expenses, deferred revenue expenditure) shown as assets till written off. They have no realisable value.
Question 7
Purchased goodwill arises when:
B
Correct Answer: Consideration paid exceeds net assets value
Purchased goodwill = Purchase consideration - Net assets value. It arises when consideration paid is more than net assets.
Question 8
Which of the following is an intangible asset?
D
Correct Answer: Trademark
Intangible assets do not have physical existence. Trademark, patent, copyright, goodwill are intangible assets.
Question 9
Goodwill can exist:
A
Correct Answer: Only with the business, not separately
Goodwill does not have existence separate from the business. It is attached to the business.
Question 10
Favourable location affects goodwill because it leads to:
C
Correct Answer: Increased customer walk-in and higher profits
Favourable location attracts more customers, increases sales and profits, thereby increasing goodwill value.
Question 11
Need for valuation of goodwill arises when:
B
Correct Answer: A partner is admitted or retires
Goodwill is valued when profit-sharing ratio changes, partner is admitted/retires/dies, firm is sold, or amalgamation occurs.
Question 12
Which accounting standard deals with intangible assets including goodwill?
D
Correct Answer: AS-26
AS-26 (Intangible Assets) issued by ICAI prescribes accounting treatment for intangible assets including goodwill.
Question 13
Efficient management as a factor affecting goodwill means:
A
Correct Answer: Experienced and capable management earns higher profits
Efficient, experienced, and capable management helps firm earn higher profits compared to others, increasing goodwill.
Question 14
Which of the following is a fictitious asset?
C
Correct Answer: Advertisement suspense
Advertisement suspense, preliminary expenses, discount on issue of shares are fictitious assets with no realisable value.
Question 15
Goodwill is valued at the time of:
B
Correct Answer: Change in profit-sharing ratio
Goodwill valuation is needed when profit-sharing ratio changes, partner admitted/retires, firm sold, or amalgamation.
