What type of account is GOODWILL? Real or nominal?
Please also give me explaination about the same.
Thanks in advance. 
Goodwill
Angel (Pursuing CA+CS+MBA) (95 Points)
11 June 2012
7 Replies
shankar
(CA, CS Final)
(243 Points)
Replied 11 June 2012
Dear Angle,
Goodwill is Real Account.
For explanation you must under stand about nature of real account.
Real Accounts
Accounts relating to properties or assets are known as ‘Real Accounts’, A separate account is maintained for each asset e.g., Cash Machinery, Building, etc., Real accounts can be further classified into tangible and intangible.
(a) Tangible Real Accounts: These accounts represent assets and properties which can be seen, touched, felt, measured, purchased and sold. e.g. Machinery account Cash account, Furniture account, stock account etc.
(b) Intangible Real Accounts: These accounts represent assets and properties which cannot be seen, touched or felt but they can be measured in terms of money. e.g., Goodwill accounts, patents account, Trademarks account, Copyrights account, etc.
The rule for Real accounts is: Debit what comes in Credit what goes out
I hope ur query is resolved.
Thanks & Regards
Shankar Singh
Angel
(Pursuing CA+CS+MBA)
(95 Points)
Replied 11 June 2012
Thank u for ur prompt reply.
Can u plz explain me how to use the rule for Real accounts ie "Debit what comes in Credit what goes out" for intangable accounts as i m confused b'coz such items do not hv any physical existence.
shankar
(CA, CS Final)
(243 Points)
Replied 11 June 2012
Dear Angel,
Read with attention of underline words
Real Account: All Asset Accounts It Includes both Tangible assets like Cahs, car, Furniture and Intagible assets Like Goodwill, Patents.
The Accounting rule for Real Account is Debit What Comes In and Credit What Goes Out.
So as per the rule of Real account when you buy something(assets) you must debit the same and Give credit to the party or cash/ Bank what the case may be.
Assets includes phisical or non physical.
dont get confused with Physical or non Physical.
If any further clarificatio required let me know i will try to resolve the same.
Thanks
Shankar
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