Question

Which of the following is a non-current asset?

• A. Goodwill
• B. Bills Receivable
• C. Pre-paid expenses
• D. Debtors

Hint:

Non-current assets include tangible assets like land and machinery and intangible assets like goodwill and patents — all used for long-term operations.

Answer 1

The Correct Option is A

Step 1: Understanding the concept of non-current assets.
Non-current assets are those assets that are held by a business for long-term use and not intended for immediate sale.
They provide benefits to the business over multiple accounting periods and include tangible and intangible assets.
Step 2: Nature of goodwill.
Goodwill is an intangible non-current asset that represents the reputation, brand value, and customer trust of a business.
It arises when a company acquires another business at a value higher than its net identifiable assets.
For example, if a business purchases another firm for ₹10,00,000 whose net asset value is ₹8,00,000, then ₹2,00,000 is goodwill — reflecting its market reputation.
Step 3: Why goodwill is non-current.
Goodwill provides long-term benefits to a company and cannot be easily converted into cash.
It is not used up or replaced within a year, so it is categorized under non-current or fixed assets.
Step 4: Analysis of options.
- (1) Goodwill: Correct, as it is a long-term intangible asset.
- (2) Bills Receivable: A current asset since it is expected to be realized within a short time.
- (3) Pre-paid expenses: Also a current asset because they relate to current accounting periods.
- (4) Debtors: Represent short-term receivables, hence a current asset.
Step 5: Conclusion.
Therefore, the correct answer is Goodwill, which is a non-current asset.