Can someone please explain to me the concept of goodwill and how you account for it, in a way I can remember as I am really struggling with this section.



  • visha
    visha Registered Posts: 218 ? ? ?

    Where do you go for your weekly shopping?
    Why do you go there? What are your reasons?

    Assuming that you go to your local Sainsbury’s – then ask your self are Sainsbury’s the cheapest supermarket? - No

    Then why do you go there and not to the cheapest supermarket!
    The Reasons that you will come up is the Goodwill the Sainsbury build with you.

    Goodwill is the reason why the Customer will give the business the repeat business.

    Goodwill is the future potential profit from it’s customers. It has an intangible value.

    That value is calculated by the market value of the business less the actual value of it’s assets.

    The market value is determined by the professional valuer such as the Estate agent for the houses, Antique valuer’s for your old furniture, Glass guide for your second hand car etc….
  • dappac
    dappac Registered Posts: 4 New contributor ?
    goodwill explianed

    Try the tutorial on the AAT website they explain goodwill??? really helpful...
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