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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
On 1st April, 2025, an existing firm had assets of ₹75,000 including cash of ₹5,000. Its creditors amounted to ₹5,000 on that date. The firm had a Reserve of ₹10,000 while the Partners’ Capital Accounts showed a balance of ₹60,000. If the normal rate of return is 20% and the goodwill of the firm is valued at ₹24,000 at four years’ purchase of super profit, find the average profit per year of the firm.
Capital Employed = Total Assets – Creditors = ₹75,000 – ₹5,000 = ₹70,000.
Normal Profit = ₹70,000 × 20% = ₹14,000.
Super Profit = Goodwill / Number of years’ purchase = ₹24,000 / 4 = ₹6,000.
Average Profit = Normal Profit + Super Profit = ₹14,000 + ₹6,000 = ₹20,000.
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "T.S. Grewal Class 12 Chapter 2 Q.17 - Nature and Valuation of Goodwill", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 2 - Nature and Valuation of Goodwill.
It is primarily curated for Class 11 and Class 12 high school commerce, accounting, and economics students, as well as aspirants preparing for board exams or CA Foundation.
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