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 like product quality, patents, large and favorable contracts, after sales service, quality of management , difference between purchased goodwill and self generated goodwill, AS 26 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
Longer establishment of business affects goodwill because:
D
Correct Answer: Broader customer base leads to higher sales and profits
Business established since long has extensive customer base, resulting in higher sales, profits, and goodwill.
Question 2
Value of goodwill is:
A
Correct Answer: Subjective and depends on valuer's assessment
Goodwill value is subjective as it depends on the assessment and agreement between interested parties.
Question 3
Patents as a factor affecting goodwill means:
C
Correct Answer: Firms with necessary patents have better goodwill value
Patents necessary for production give competitive advantage, helping earn higher profits and increasing goodwill.
Question 4
Purchased goodwill should be:
B
Correct Answer: Amortised over its useful life (normally not exceeding 10 years)
As per AS-26, purchased goodwill is recognised and amortised at earliest but within estimated useful life, normally not exceeding 10 years.
Question 5
Quality of products affects goodwill because:
D
Correct Answer: Known quality leads to higher sales and goodwill
Firm known for quality products has higher sales and profits, leading to high value of goodwill.
Question 6
In partnership context, goodwill represents:
A
Correct Answer: Value of profit share sacrificed by existing partners
In partnership, goodwill is the value of share of profit sacrificed by the sacrificing partner(s) when a new partner is admitted.
Question 7
Market situation affects goodwill when:
C
Correct Answer: Demand is higher than supply, leading to higher profits
When demand exceeds supply, firm earns higher profits with lower capital requirement, increasing goodwill value.
Question 8
Which statement about goodwill is correct?
B
Correct Answer: Goodwill helps in earning higher than normal profits
Goodwill is an intangible asset that helps business earn greater profits than normal returns on capital.
Question 9
Access to supplies as a factor means:
D
Correct Answer: Regular supply arrangements when materials are difficult to get increases goodwill
When supplies are difficult to get, firms with regular supply arrangements have high goodwill value.
Question 10
The difference between purchased goodwill and self-generated goodwill is:
A
Correct Answer: Purchased goodwill is recorded in books; self-generated is not
Purchased goodwill (consideration paid) may be recognised in books; self-generated goodwill (no consideration) is not recognised.
Question 11
Nature of business affects goodwill when:
C
Correct Answer: Products dealt in are in high demand, leading to higher profits
If nature of business is such that products are in high demand, profits are higher, thus increasing goodwill.
Question 12
Risks associated with business affect goodwill because:
B
Correct Answer: Lesser risks lead to higher goodwill value
If risks associated with business are lesser than normal, business will have higher value for goodwill.
Question 13
Past performance of a firm affects goodwill because:
D
Correct Answer: Firms earning consistent higher profits have better goodwill value
Firms earning higher profits year after year have better goodwill value compared to firms with losses or lesser profits.
Question 14
Favourable contracts affect goodwill because:
A
Correct Answer: Long-term contracts at favourable prices increase profits and goodwill
Long-term contracts for sale and purchase at favourable prices affect profits positively and increase goodwill.
Question 15
Factors affecting goodwill include:
C
Correct Answer: good after-sale service
After-sale services affect the value of goodwill positively as customers believe that they can get efficient service even if product develops faults after purchase.
