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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
A firm earns an average profit of ₹3,00,000 during the last few years. The normal rate of return of the industry is 15%. The assets of the business were ₹17,00,000 and its liabilities were ₹2,00,000. Calculate the goodwill of the firm by the Capitalisation of Average Profit Method.
Capitalised Value of Profit = Average Profit × 100 / Normal Rate of Return = ₹3,00,000 × 100 / 15 = ₹20,00,000.
Capital Employed = Assets – Liabilities = ₹17,00,000 – ₹2,00,000 = ₹15,00,000.
Goodwill = ₹20,00,000 – ₹15,00,000 = ₹5,00,000.
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.26 - 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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