Q.State any two circumstances under which goodwill of a partnership firm is valued.

Only purchased goodwill can be recorded; self-generated goodwill cannot be brought into the books.

In the TN HSC Class-12 Accountancy syllabus (Goodwill in Partnership Accounts), goodwill is the value of a firm's reputation that lets it earn more than the normal return.

• Purchased / Acquired goodwill arises when a business is bought and the buyer pays more than the net asset value; that excess is a real cost, so it is recorded as an asset. …

Goodwill is an intangible asset — it has no physical form but real value; the other three statements are false.

Goodwill is the monetary value of a firm's reputation, customer connection and earning capacity above the normal return. Checking each option:

• (a) False — it is not fictitious; fictitious assets (like preliminary expenses) have no real value, whereas goodwill has real, realisable value.
• (b) True — goodwill has value and can be bought/sold but has no physical substance, so it is an intangible asset. …

The odd one out is the Fixed capital method (a), because the other three are goodwill-valuation methods.

Three of the four items belong together as methods of valuing goodwill:

• Average profit method
• Super profit method
• Capitalisation method …