Question 13 Chapter 3 of +2-A
Table of Contents
13. Profits of a firm for the year ended 31st March for the last five years were:
| Year Ended | 31st March 2015 | 31st March 2016 | 31st March 2017 | 31st March 2018 | 31st March 2019 |
| Profit/(Loss) | 20,000 | 24,000 | 30,000 | 25,000 | 18,000 |
Calculate the value of goodwill on the basis of three years’ purchase of Weighted Average Profit after assigning weights 1, 2, 3, 4 and 5 respectively to the profits for years ended 31st
March, 2015, 2016, 2017, 2018 and 2019.
The solution of Question 13 Chapter 3 of +2-A:
| Year |
Profit A |
Weight B |
Product (C = A * B) |
| 2015 | 20,000 | 1 | 20,000 |
| 2016 | 24,000 | 2 | 48,000 |
| 2017 | 30,000 | 3 | 90,000 |
| 2018 | 25,000 | 4 | 1,00,000 |
| 2019 | 18,000 | 5 | 90,000 |
| Total | 15 | 3,48,000 | |
|
Average Profit |
= | Total Profit for past given years |
| Number of years |
| = | 3,48,000 | |
| 15 | ||
| = | 23,200 |
Number of years’ purchase = 3
| Goodwill | = | Average Profit X Number of years’ purchase |
| Goodwill | = | 23,200 X 3 |
| Goodwill | = |
69,600 |
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. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
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
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