ACCOUNTS

[Sarah Paul]

Short notes on goodwill please?

 

[Cryptids]

Short notes on goodwill please?

Goodwill is actually the name and fame earned by a business. Goodwill is recorded as an intangible fixed asset in the balance sheet.
Lets say that a business is worth $80,000 and Mr. X purchased it for $87,000 !
The additional $7000 is payed for the goodwill of the business because Mr.X will not need to attract much customers as the business is already famous.

 

[Sarah Paul]

Oh k so how do u calculate it?
And there is something called the old goodwill and new goodwill ryt? Can u explain how to calculate it and wat is the double entry for new goodwill and oldwill?

 

[Ebby_SaLeem]

Goodwill ain't in the syllabus anymore! -_-
Just remember that its an intangible asset and doesn't exist in the business as its against the principle of "money measurement"

 

[Cryptids]

Oh k so how do u calculate it?
And there is something called the old goodwill and new goodwill ryt? Can u explain how to calculate it and wat is the double entry for new goodwill and oldwill?

Calculation is simple.
If you buy a business for $100,000 but its actual worth [Total assets(Current and fixed) ] is $92,000 the the goodwill is calculated as 100000-92000= $8000 !
Don't worry this ain't in the syllabus anymore.
I need to revise the entry its been long I've haven't studied accounts !

 

[Sarah Paul]

Goodwill ain't in the syllabus anymore! -_-
Just remember that its an intangible asset and doesn't exist in the business as its against the principle of "money measurement"

Are u sure???

 

[Sarah Paul]

Are u sure it isnt coming for ol accounting paper 2013?

 

[Ebby_SaLeem]

Are u sure???

i guess that pretty obvious!

http://papers.xtremepapers.com/CIE/...Principles of Accounts (7110)/7110_y13_sy.pdf
See page 13, it clearly says "demonstrate knowledge of the meaning, importance and designation of non-current assets, intangible
assets (goodwill), current assets, current liabilities, long term liabilities and working capital".
ONLY the knowledge and importance, no calculations

 

[Sarah Paul]

K

i guess that pretty obvious!

http://papers.xtremepapers.com/CIE/Cambridge International O Level/Principles of Accounts (7110)/7110_y13_sy.pdf
See page 13, it clearly says "demonstrate knowledge of the meaning, importance and designation of non-current assets, intangible
assets (goodwill), current assets, current liabilities, long term liabilities and working capital".
ONLY the knowledge and importance, no calculations

K thankyou. I checked it before but in skul our teachers taught us GOODWILL. Dats y i was kind of scared

 

[Ebby_SaLeem]

K


K thankyou. I checked it before but in skul our teachers taught us GOODWILL. Dats y i was kind of scared

my teacher never taught me goodwill we always skipped the topic! its an intangible asset just remember that

 

[Sarah Paul]

my teacher never taught me goodwill we always skipped the topic! its an intangible asset just remember that

Then mytbe it wont come

 

[Sarah Paul]

Ive got a doubt. what is the actual equation for Acid test ratio? Is it
1. Current Assets - closing inventory -Prepayments divided by Current Liabilities or
2. Current Assets- closing inventory divided by Current Liabilities

Please Can ull clear this doubt quickly ?

 

[Ebby_SaLeem]

Ive got a doubt. what is the actual equation for Acid test ratio? Is it
1. Current Assets - closing inventory -Prepayments divided by Current Liabilities or
2. Current Assets- closing inventory divided by Current Liabilities

Please Can ull clear this doubt quickly ?

Current assets less stock (closing stock) divided by current liabilities

 

[Sarah Paul]

But there was a note saying that quick acid test ratio is also Current Assets- Closing stock - Prepayments divided by current liabilities

 

[Sarah Paul]

Ive got another doubt its a past paper question can u explain it. The question is:
Why is quick acid test ratio a better way of measuring rather than current ratio? (Hope u have come across this question and im not sure if this is the proper wording)?
Can u answer this please?

 

[Ebby_SaLeem]

Ive got another doubt its a past paper question can u explain it. The question is:
Why is quick acid test ratio a better way of measuring rather than current ratio? (Hope u have come across this question and im not sure if this is the proper wording)?
Can u answer this please?

Its because in order to calculate quick ratio, stock is deducted from current assets as its the least liquid asset and stock may take time to sell, thats why its better way of measuring liquidity in a business... hope this helps

 

[Sarah Paul]

Its because in order to calculate quick ratio, stock is deducted from current assets as its the least liquid asset and stock may take time to sell, thats why its better way of measuring liquidity in a business... hope this helps

Thankyou

 

[Ebby_SaLeem]

Thankyou

Anytime!

 

[Ebby_SaLeem]

Sorry just a correction... stock is deducted from current assets because its NOT a liquid asset! Sorry but this is the correct thing....

 

[Sarah Paul]

One of my tutor said that all the items under current assets can be easily turned into cash except inventory. Is that the reason y quick acid test ratio is better than current ratio. Is this correct?