Goodwill refers to that intangible asset which a company has made over the years by providing satisfaction to its customers and therefore when company intends to sell its business to other firms it receives monetary or non monetary consideration for goodwill. Given below is the journal entry which is passed for recording goodwill into the books of accounts of a company –
Goodwill account Dr
To Cash account
In the above entry since goodwill is an intangible asset it is debited in the books of account and also since company pays cash to acquire goodwill cash account is credited.