Question 1

Q.No.1 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

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Question 01 Chapter 3 of +2-A
Average Profit Method
 1. Goodwill is to be valued at three years' purchase of four years' average profit. Profits for the last four years ending on 31st March of the firm were:2016 − 12,000; 2017 − 18,000; 2018 − 16,000; 2019 − 14,000.Calculate the amount of Goodwill.
The solution of Question 01 Chapter 3 of +2-A:

Average Profit
= 
Total Profit for past given years

Number of years

Average Profit
= 
12,000+18,000+16,000+14,000

4

= 
60,000

4

Question 2

Q.No.2 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 02 Chapter 3 of +2-A
2. Profits for the five years ending on 31st March, are as follows: the Year 2015 − 4,00,000; Year 2016 − 3,98,000; Year 2017 − 4,50,000; Year 2018 − 4,45,000 and Year 2019 − 5,00,000. Calculate goodwill of the firm on the basis of 4 years' purchase of 5 years' average profit.
The solution of Question 02 Chapter 3 of +2-A:

Average Profit
= 
Total Profit for past given years

Number of years

Average Profit
= 
4,00,000+3,98,000+4,50,000+4,45,000+ 5,00,000

Question 3

Q.No.3 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 03 Chapter 3 of +2-A
3. Calculate the value of goodwill on the basis of three years' purchase of the average  profit of the preceding five years which were as follows:

Year 
2018-19
2017-18
2016-17
2015-16
2014-15

Profits
8,00,000
15,00,000
18,00,000
4,00,000 (Loss)
13,00,000

The solution of Question 03 Chapter 3 of +2-A:

Average Profit
= 
Total Profit for past given years

Number of years

Average Profit
= 
13,00,000+(-4,00,000)+18,00,000+15,00,000+ 8,00,000

5

Question 4

Q.No.4 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 04 Chapter 3 of +2-A
4. Calculate the value of a firm's goodwill on the basis of one and a half years’ purchase of the average profit of the last three years. The profit for the first year was 1,00,000, profit for the secondyear was twice the profit of the first year and for the third year, profit was one and half times of the profit of the second year.
The solution of Question 04 Chapter 3 of +2-A:

Average Profit
= 
Total Profit for past given years*1

Number of years

Averag

Question 5

Q.No.5 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 05 Chapter 3 of +2-A
5. Purav and Purvi are partners in firm sharing profits and losses in the ratio of 2 : 1. They decide to take Parv into a partnership for 1/4th share on 1st April 2019. For this purpose, goodwillis to be valued at four times the average annual profit of the previous four or five years, whichever is higher. The agreed profits for goodwill purpose of the past five years are:

Year 
2018-19
2017-18
2016-17
2015-16
2014-15

Profits
8,00,000
15,00,000
18,00,000
4,00,

Question 6

Q.No.6 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 06 Chapter 3 of +2-A
6. Annu, Baby and Chetan are partners in firm sharing profits and losses equally. They decide to take Deep into partnership from 1st April 2019 for 1/5th share in the future profits. For this purpose, goodwill is to be valued at 100% of the average annual profits of the previous three or four years, whichever is higher. The annual profits for the purpose of goodwill for thepast four years were:Year Ended Profit31st March, 2019 2,88,000;31st March, 2018 1,81,800;31s

Question 7

Q.No.7 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 07 Chapter 3 of +2-A
Average Profit Method when Past Adjustments are Made: -
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

Question 8

Q.No.8 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 08 Chapter 3 of +2-A
8. Abhay, Babu and Charu are partners sharing profits and losses equally. They agree to admit Daman for an equal share of profit. For this purpose, the value of goodwill is to be calculated onthe basis of four years' purchase of the average profit of the last five years. These profits for the year ended 31st March were:

Year 
2015
2016
2017
2018
2019

Profit/(Loss)
1,50,000
3,50,000
5,00,000
7,10,000
(5,90,000)

On 1st April 2018, a car costing 1,00,000 was p

Question 9

Q.No.9 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 09 Chapter 3 of +2-A
9. Bharat and Bhushan are partners sharing profits in the ratio of 3: 2. They decided to admit

Manu as a partner from 1st April 2019 on the following terms:
Manu will be given 2/5th share of the profit.Goodwill of the firm will be valued at two years' purchase of three years' normal average profit of the firm.Profits of the previous three years ended 31st March, were:2019 - Profit 30,000 after debiting loss of stock by fire 40, 000.2018 - Loss 80,000 includes volu

Question 10

Q.No.10 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 10 Chapter 3 of +2-A
10. Bhaskar and Pillai are partners sharing profits and losses in the ratio of 3 : 2. They admit Kanika into partnership for 1/4th share in profit. Kanika brings in her share of goodwill in cash.Goodwill for this purpose is to be calculated at two years' purchase of the average normal profit of past three years. Profits of the last three years ended 31st March, were:2017 - Profit 50,000 including profit on sale of assets 5,000.2018 - Loss 20,000 including loss by f

Question 11

Q.No.11 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 11 Chapter 3 of +2-A
11. Sumit purchased Amit's business on 1st April 2019. Goodwill was decided to be valued at two years' purchase of the average normal profit of the last four years. The profits for the past four years were:

Year Ended 
31st March 2016
31st March 2017
31st March 2018
31st March 2019

Profit/(Loss)
80,000
1,45,000
1,60,000 
2,00,000

Books of Account revealed that:

Abnormal loss of 20,000 was debited to Profit and Loss Account for the year ended 31st March 201

Question 12

Q.No.12 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 12 Chapter 3 of +2-A
Geet and Meet are partners in a firm. They admit Jeet into a partnership for an equal share. It was agreed that goodwill will be valued at three years' purchase of the average profit of the last five years. Profits 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)
90,000(Loss)
1,60,000 
1,50,000 
65,000
1,77,000

Books of Account of the firm revealed that:

The firm had gai

Question 13

Q.No.13 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 13 Chapter 3 of +2-A
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 31stMarch, 2015, 2016, 2017, 2018 and 2019.
 
The soluti

Question 14

Q.No.14 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 14 Chapter 3 of +2-A
14. A and B are partners sharing profits and losses in the ratio of 5 : 3. On 1st April 2019, C is admitted to the partnership for 1/4th share of profits. For this purpose, goodwill is to be valued at two years' purchase of the last three years' profits after allowing partners’ remuneration. Profits to be weighted 1: 2 : 3, the greatest weight being given to last year. Net profit before partners' remuneration were: 2016-17 : 2,00,000; 2017-18 : 2,30,000; 2018-19 :

Question 15

Q.No.15 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 15 Chapter 3 of +2-A
15. Raman and Daman are partners sharing profits in the ratio of 60 : 40 and for the last four years they have been getting annual salaries of 50,000 and 40,000 respectively. The annual accounts have shown the following net profit before charging partners' salaries: Year ended 31st March, 2017 − 1,40,000; 2018 − 1,01,000 and 2019 − 1,30,000. On 1st April, 2019, Zeenu is admitted to the partnership for 1/4th share in profit without any salary. Goodwill is to be valu

Question 16

Q.No.16 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 16 Chapter 3 of +2-A
16. Calculate goodwill of a firm on the basis of three years' purchase of the Weighted Average Profit of the last four years. The profits of the last four financial years ended 31st March, were:2016 − 25,000; 2017 − 27,000; 2018 − 46,900 and 2019 − 53,810. The weights assigned to each year are: 2016 − 1; 2017 − 2; 2018 − 3; 2019 − 4. You are supplied the following information:(i) On 1st April, 2016, a major plant repair was undertaken for 10,000 which was charged t

Question 17

Q.No.17 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 17 Chapter 3 of +2-A
17. Dinesh and Mahesh are partners sharing profits and losses in the ratio of 3 : 2. They admit  Ramesh into partnership for 1/4th share in profits. Ramesh brings in his share of goodwill in cash. Goodwill for this purpose shall be calculated at two years' purchase of the weighted average normal profit of past three years. Weights being assigned to each year 2017−1;2018−2 and 2019−3. Profits of the last three years were:2017 − Profit 50,000 including profits on sal

Question 18

Q.No.18 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 18 Chapter 3 of +2-A
18. Manbir and Nimrat are partners and they admit Anahat into partnership. It was agreed to value goodwill at three years' purchase on Weighted Average Profit Method taking profits of the last five years. Weights assigned to each year as 1, 2, 3, 4 and 5 respectively to profits for the year ended 31st March 2015 to 2019. The profits for these years were: 70,000, 1,40,000, 1,00,000, 1,60,000 and 1,65,000 respectively. Scrutiny of books of account revealed the follow

Question 19

Q.No.19 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 19 Chapter 3 of +2-A
19. Mahesh and Suresh are partners and they admit Naresh into partnership. They agreed to value goodwill at three years' purchase on the Weighted Average Profit Method taking profits for the last five years. They assigned weights from 1 to 5 beginning from the earliest year and onwards. The profits for the last five years were as follows:

Year Ended 
31st March 2015
31st March 2016
31st March 2017
31st March 2018
31st March 2019

Profit/(Loss)
20,000
24,000
30,

Question 20

Q.No.20 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Sarbjit Singh · Accepted Answer

Question 20 Chapter 3 of +2-A
20. Mahesh and Suresh are partners and they admit Naresh into partnership. They agreed to value goodwill at three years' purchase on the Weighted Average Profit Method taking profits for the last five years. They assigned weights from 1 to 5 beginning from the earliest year and onwards. The profits for the last five years were as follows:

Year
2015-16
2016-17
2017-18 
2018-19

Profit
1,01,000  
1,24,000 
1,00,000 
1,40,000

Weights 
1
2
3
4

On a scrutiny

Average Profit	=	Total Profit for past given years
		Number of years

Goodwill	=	Average Profit X Number of years’ purchase
Goodwill	=	15,000 X 3
Goodwill	=	45,000

=	60,000
=	4
=	15,000

T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1 Solutions Chapter No. 3 - Goodwill: Nature and Valuation

Quick Chapter Summary & Cheat Sheet

💡 Double Entry Accounting Principles

Topics & Questions Solved:

Q.No.1 | Chapter 3 – Goodwill: Nature and Valuation | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

The solution of Question 01 Chapter 3 of +2-A:

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

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

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

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