Question 36 Chapter 3 of +2-A
Table of Contents
36. Ayub and Amit are partners in a firm and they admit Jaspal into partnership w.e.f. 1st April 2019. They agreed to value goodwill at 3 years’ purchase of Super Profit Method for which they decided to average profit of the last 5 years. The profits for the last 5 years were:
| Year Ended | Net Profit | |
| 31st March 2015 | 1,50,000 | |
| 31st March 2016 | 1,80,000 | |
| 31st March, 2017 | 1,00,000 | Including abnormal loss of 1,00,000 |
| 31st March, 2018 | 2,60,000 | Including abnormal gain (profit of 40,000) |
| 31st March, 2019 | 2,40,000 |
The solution of Question 36 Chapter 3 of +2-A:
| Year |
Profit/losses A |
Adjustment |
Actual Profit (C = A – B) |
| 31 March, 2015 | 1,50,000 | – | 1,50,000 |
| 31 March, 2016 | 1,80,000 | – | 1,80,000 |
| 31 March, 2017 | 1,00,000 | + 1,00,000 | 2,00,000 |
| 31 March, 2017 | 2,60,000 | – 40,000 | 2,20,000 |
| 31 March 2017 | 2,40,000 | – | 2,40,000 |
| Total | 9,90,000 | ||
| Super Profit | = | Actual average Profit- Normal Profit |
| Actual average Profit | = | Total Profit for past given years |
| = | Number of years | |
| = | 9,90,000 | |
| 5 | ||
| = | 1,98,000 |
| Normal Profit | = | Capital Employed | X | Normal Rate of Return |
| 100 |
| = | 15,00,000 | X | 10 | |
| 100 | ||||
| = | 1,50,000 |
| Capital Employed | = | 20,00,000 – 5,00,000 |
| = | 15,00,000 | |
| Super Profit | = | Actual Profit – Normal Profit |
| = | 1,98,000 – 1,50,000 | |
| = | 48,000 |
Number of years’ purchase = 3
| Goodwill | = | Super Profit X number of years’ purchase |
| Goodwill | = | 48,000 x 3 |
| Goodwill | = | 1,44,000 |
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. 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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