Q.No.31 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Question 31 Chapter 3 of +2-A

31. Capital of the firm of Sharma and Verma is 2,00,000 and the market rate of interest is 15%. Annual salary to partners is 12,000 each. The profits for the last three years were 60,000; 72,000 and 84,000. Goodwill is to be valued at 2 years' purchase of the last 3 years' average super profit.
Calculate the goodwill of the firm.

The solution of Question 31 Chapter 3 of +2-A:

Year	Profit before Partners’ Remuneration A	Partners’ Remuneration D	Actual Profit after Remuneration (C = A - B)
2017	60,000	24,000	36,000
2018	72,000	24,000	48,000
2019	84,000	24,000	60,000
Total			1,44,000

 

Super Profit	=	Actual average Profit- Normal Profit
Actual average Profit	=	Total Profit for past given years
	=	Number of years
	=	1,44,000
		3
	=	48,000

 

Normal Profit	=	Capital Employed	X	Normal Rate of Return
				100

=	2,00,000	X	15
			100
=	30,000

 

Super Profit	=	48,000- 30,000
	=	18,000

Number of years’ purchase = 2

Goodwill	=	Super Profit X number of years of purchase
Goodwill	=	18,000 x 2
Goodwill	=	36,000

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

• Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
• Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
• Chapter No. 3 – Goodwill: Nature and Valuation
• Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
• Chapter No. 5 – Admission of a Partner
• Chapter No. 6 – Retirement/Death of a Partner
• Chapter No. 7 – Dissolution of a Partnership Firm

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 8 – Company Accounts –  Accounting for Share Capital
• Chapter No. 9 – Company Accounts – Issue of Debentures
• Chapter No. 10 – Redemption of Debentures

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 1 – Financial Statements of a Company
• Chapter No. 2 – Financial Statement Analysis 
• Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
• Chapter No. 4 – Accounting Ratios
• Chapter No. 5 – Cash Flow Statement

 

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication