Loading Tutorstips...
✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Profits of a firm for the year ended 31st March for the last five years were: 2021 ₹20,000; 2022 ₹24,000; 2023 ₹30,000; 2024 ₹25,000; 2025 ₹18,000. Calculate the value of goodwill on the basis of three years’ purchase of the Weighted Average Profit, after assigning weights 1, 2, 3, 4 and 5 respectively to the profits for the years ended 31st March, 2021, 2022, 2023, 2024 and 2025.
Calculation of Weighted Average Profit
| Year | Profit (₹) | Weight | Product (₹) |
|---|---|---|---|
| 2021 | 20,000 | 1 | 20,000 |
| 2022 | 24,000 | 2 | 48,000 |
| 2023 | 30,000 | 3 | 90,000 |
| 2024 | 25,000 | 4 | 1,00,000 |
| 2025 | 18,000 | 5 | 90,000 |
| Total | 15 | 3,48,000 |
Weighted Average Profit = ₹3,48,000 / 15 = ₹23,200.
Goodwill = ₹23,200 × 3 = ₹69,600.
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.8 - 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.
You can take our custom-built interactive practice quiz directly on this page to test your understanding of "T.S. Grewal Class 12 Chapter 2 Q.8 - Nature and Valuation of Goodwill" instantly.