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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Rohit and Hardik are partners sharing profits and losses equally. They decided to admit Surya as a partner for a 1/3 share. For this purpose, the goodwill of the firm is to be valued. From the following information, calculate the value of goodwill by: (i) the Capitalisation of Average Profit Method; and (ii) the Capitalisation of Super Profit Method. (a) Average Capital Employed ₹6,00,000; (b) Normal Rate of Return 12%; (c) Profit for the last three years: 2021-22 ₹90,000, 2022-23 ₹80,000, 2023-24 ₹1,00,000; (d) Assets (excluding goodwill) ₹10,00,000; (e) Liabilities ₹4,00,000.
Average Profit = (₹90,000 + ₹80,000 + ₹1,00,000) / 3 = ₹2,70,000 / 3 = ₹90,000.
Capital Employed = Assets – Liabilities = ₹10,00,000 – ₹4,00,000 = ₹6,00,000.
(i) Capitalisation of Average Profit: Capitalised Value = ₹90,000 × 100 / 12 = ₹7,50,000; Goodwill = ₹7,50,000 – ₹6,00,000 = ₹1,50,000.
(ii) Capitalisation of Super Profit: Normal Profit = ₹6,00,000 × 12% = ₹72,000; Super Profit = ₹90,000 – ₹72,000 = ₹18,000; Goodwill = ₹18,000 × 100 / 12 = ₹1,50,000.
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.37 - 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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