# Question 07 Chapter 3 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 07 Chapter 3 of +2-A

7. Divya purchased Jyoti’s business with effect from 1st April 2019. Profits shown by Jyoti’s
business for the last three financial years was:
2016-17 : 1,00,000 including an abnormal gain of 12, 500.
2017-18 : 1,25,000 after charging an abnormal loss of 25, 000.
2018-19: 1,12,500 excluding 12, 500 as insurance premium on firm′s property −now to be insured.
Calculate the value of a firm’s goodwill on the basis of two year’s purchase of the average profit of the last three years.

The solution of Question 07 Chapter 3 of +2-A

:

 Average Profit = Total Profit for past given years Number of years
 Average Profit = 87,500+1,50,000+1,00,000 3

 = 3,37,500 3 = 1,12,500

Number of years’ purchase = 2

 Goodwill = Average Profit X Number of years’ purchase Goodwill = 1,12,500 X 2 Goodwill = 2,25,000

Working Note: –

 Adjusted profit for the year 2016-17 = Total Profit −Abnormal Gain = 1,00,000 -12,500 = 87,500 Adjusted profit for the year 2017-18 = Total Profit +Abnormal Loss = 1,25,000 +25,000 = 1,50,000 Adjusted profit for the year 2018-19 = Total Profit −Indirect Expenses = 1,12,500 -12,500 = 1,00,000

### T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

• Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
• Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
• Chapter No. 3 – Goodwill: Nature and Valuation
• Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
• Chapter No. 5 – Admission of a Partner
• Chapter No. 6 – Retirement/Death of a Partner
• Chapter No. 7 – Dissolution of a Partnership Firm

### T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 1 – Financial Statements of a Company
• Chapter No. 2 – Financial Statement Analysis
• Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
• Chapter No. 4 – Accounting Ratios
• Chapter No. 5 – Cash Flow Statement

This site uses Akismet to reduce spam. Learn how your comment data is processed.