Question 20 Chapter 3 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 20 Chapter 3 of +2- Part-
Q-20 - CH-3 - Usha +2 Book 2018 - Solution


Question 20 Chapter 3 of +2-Part-1


20. (Super Profit/Capitalisation method) A firm earns a profit of Rs.5,000 per year. The average capital employed in the business by the firm is Rs.25,000. The normal rate of return on the capital employed in similar business is 10%.
You are required to calculate goodwill of the firm by
a. Super profit method on the basis of three years purchase.
b. Capitalisation method (Both super profit & average profit).

The solution of Question 20 Chapter 3 of +2 Part-1: – 

Actual Profits p.a=Rs.5,000
Capital Employed=Rs. 25,000
Rate of return=10%


Normal Profit=Capital EmployedXNormal Rate of Return

i) Super Normal Profit Method

Super Profit=Actual Profit – Normal Profit
 =5,000 – 2,500



Number of years’ purchase=3
Goodwill=Super Profit X Number of years’ purchase
 =2,500 X 3


ii) Capitalisation Method:

a) Capitalisation of Super Profits Method:

Goodwill=Super ProfitX100
 Normal Rate of Return

b) Capitalisation of Average Profits Method:

Capitalisation of Business=Super ProfitX100
 Normal Rate of Return
Goodwill=Capitalised value of the business – Average Capital Employed
 =50,000 – 25,000




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Also, Check out the solved question of previous Chapters: –

Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution

Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution


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Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms



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