BOOK KEEPING & ACCOUNTANCY
year of success 3
CH. 1. VALUATION OF GOODWILL [Q. 2 (A) : 5 MARKS]
One practical problem on Valuation of Goodwill carrying 5 marks will be asked in
of the Board Paper.
Valuation of Goodwill: -
As prescribed in the syllabus, the value of goodwill as on a particulardate is ascertained by using any one of the following methods:i.
The Average Profit Method and
The Super Profit Method.INTRODUCTIONDefinition
: Goodwill is an intangible (non
visible) fixed asset having a realizable (economic)value. It is the reputation of business. Valuation of goodwill is very important in the case of admission, retirement and death of partners.IMPORTANT FORMULAEPROBLEMS
The profits of the firm for the last five years are 2002 Rs. 20,000; 2003 Rs. 16,000; 2004 Rs.24,000; 2005 Rs. 8000; 2006 Rs. 12,000. Calculate the goodwill of the firm.
[Ans. Rs. 16,000]
Calculate the good will from the following information goodwill is valued at three yearspurchase of average profit of the last six years. Profit and losses of the business in the last sixyears are as follows,
[Ans. Rs. 95,000]
Year, Rs, 60,000(Profit)3
Year, Rs, 10,000(Loss)4
Year, Rs, 50,000(Profit)5
Year, Rs, 30,000 (Loss)6
Year, Rs, 80,000(Profit)
Calculate the value of goodwill according to average profit method. Goodwill is valued at threeyears purchase of last four year average profit. The profits and losses for the last four yearsare.
[Ans. Rs. 27,000]