When can purchased goodwill be recorded in the partnership firm's books?

Correct answer: When consideration has been paid to acquire the goodwill

Purchased goodwill is valued on the basis of the actual consideration paid to acquire it, so it can be recorded in the books at cost. A mere estimate by the partners is not sufficient for recording goodwill. Exam tip: internally generated goodwill is generally not recorded, whereas purchased goodwill is recorded on the basis of payment made.