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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Puneet and Tarun are in the restaurant business, having credit balances in their fixed Capital Accounts of ₹2,50,000 each. They have credit balances in their Current Accounts of ₹30,000 and ₹20,000 respectively. The firm does not have any liability. They are regularly earning profits and their average profit of the last 5 years is ₹1,00,000. If the normal rate of return is 10%, find the value of goodwill by the Capitalisation of Average Profit Method.
Total Actual Capital Employed = ₹2,50,000 + ₹2,50,000 + ₹30,000 + ₹20,000 = ₹5,50,000.
Capitalised Value of Average Profit = ₹1,00,000 × 100 / 10 = ₹10,00,000.
Goodwill = ₹10,00,000 – ₹5,50,000 = ₹4,50,000.
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.28 - 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.
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