Theory question 102
Manufacturing Accounts(a) What is goodwill?
(b) List four items of recurrent expenditure for a local government.
(c) Explain the three types of inventory in manufacturing account.
Show the model answer
(a) Goodwill: the value of a business's reputation, customers and connections that lets it earn more than normal profit; measured as the excess of purchase price over the fair value of net assets.
(b) Any four: salaries and wages; stationery; fuel and maintenance of vehicles; electricity and water bills; drugs; sanitation; travelling expenses; rent; hospitality; staff training.
(c) Raw materials: materials bought but not yet put into production.
Work-in-progress: goods partly processed but not finished at the end of the period.
Finished goods: completed products held ready for sale.
Define goodwill, list day-to-day council spending, then the three stock types.