If a businessman purchases a company from another businessman for a premium value, then its intangible assets come into goodwill. In the goodwill of a company, there come a lot of things. Some important things that come into the goodwill of a company are the brand name of a company, a solid base of the customers, good relationship with the customers, good relationship with the employees within a company, and any kind of patent technology. As a student, if you don’t have enough idea about goodwill in accounting, then you can get help from the expert writers of the academic writing services.
Types of goodwill
There are two basic types of goodwill in accounting. First of all, there comes purchased goodwill and in the second, there comes non-purchased or inherent goodwill. When the main concern of a company depends upon purchasing but the consideration of the paid amount exceeds from the requirements of the separable net assets, then this type of goodwill is known as purchased goodwill. On the other hand, if a company is enjoying a fair value of its separable assets, then this type of goodwill of a company is known as non-purchased or inherent goodwill.
Factors affecting goodwill
In the field of a business, there are a lot of factors that can affect the goodwill of a company. The most important factors that can become a cause of affecting the goodwill of a company are given below;
- If a company is providing outstanding quality of the products or services, then it’s goodwill
- There are a lot of effects of location on the goodwill of a company. If a company is situated in a favourable place, then its goodwill will also increase.
- If a company is in the field of business for a number of years, then this thing will also become a cause of increasing its goodwill.
- If a company is providing special advantages to the customers, then this thing can also become a cause of increasing the goodwill of a company. For example, if a company is providing the best services or products at the most affordable prices, then its goodwill will be increased.
- There are a lot of effects of the nature of business on the goodwill of a company. For example, if a company is providing such products or services that have stable continuous demand, then the goodwill of that company will also be increased.
- If a company has maintained good relations with the employees, labours, and government, then its goodwill will also be increased.
Importance of goodwill in accounting
If a company has goodwill in the field of business, then it will gain a lot of benefits. The importance of goodwill in accounting is explained below;
- With the help of goodwill, the number of return customers of a company will be increased.
- With the help of well-established goodwill, the chances of getting the loans from the bank and other potential customers will be increased.
- It is also helpful for a company to strengthen its business network.
- In the case of blunder or a mistake, the people can forget that blunder or mistake due to its goodwill.
- With the help of goodwill, the intangible assets of a company will also be increased.