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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
A business earned an average profit of ₹1,80,000 during the last few years. The average capital employed by the firm is ₹12,50,000. If the goodwill of the firm is valued at ₹1,60,000 at 2 years’ purchase of super profit, find the normal rate of return.
Super Profit = Goodwill / Number of years’ purchase = ₹1,60,000 / 2 = ₹80,000.
Normal Profit = Average Profit – Super Profit = ₹1,80,000 – ₹80,000 = ₹1,00,000.
Normal Rate of Return = Normal Profit / Capital Employed × 100 = ₹1,00,000 / ₹12,50,000 × 100 = 8%.
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.20 - 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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