CBSE 2025, Set 2

Question

(a) Abha and Sara were partners in a firm. Their capitals were: Abha ₹3,00,000 and Sara ₹2,00,000. The normal rate of return in similar business is 10%. The profits of the firm of Abha and Sara for the last three years were: 2021-22 ₹60,000; 2022-23 ₹90,000 and 2023-24 ₹1,20,000.
Calculate goodwill of the firm on the following basis:
(i) Four years purchase of the average profits for the last three years.
(ii) Capitalisation of super-profits.

Edvaya · Accepted Answer

The correct answer is Subjective. **Calculation of Goodwill:** **(i) Four years purchase of average profits:** Total Profits = 60,000 + 90,000 + 1,20,000 = ₹ 2,70,000. Average Profit = 2,70,000 / 3 = ₹ 90,000. Goodwill = Average Profit × Number of years' purchase Goodwill = 90,000 × 4 = **₹ 3,60,000**. **(ii) Capitalisation of Super Profits:** Capital Employed = Abha's Capital + Sara's Capital = 3,00,000 + 2,00,000 = ₹ 5,00,000. Normal Profit = 10% of 5,00,000 = ₹ 50,000. Super Profit = Average Profit - Normal Profit Super Profit = 90,000 - 50,000 = ₹ 40,000. Goodwill = Super Profit × (100 / Normal Rate of Return) Goodwill = 40,000 × (100 / 10) = **₹ 4,00,000**.

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Accountancy > Accounting For Partnership Firms > Goodwill Nature And Valuation

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