Get complete step-by-step solutions for T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1 - Chapter No. 3 - Goodwill: Nature and Valuation. Study double-entry system details, practice timed problems, and verify answers directly.
Chapter No. 3 - Goodwill: Nature and Valuation
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.
| 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 | |
| = | 15,000 |
Number of years’ purchase = 3
| Goodwill | = | Average Profit X Number of years’ purchase |
| Goodwill | = | 15,000 X 3 |
| Goodwill | = | 45,000 |
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.