Match List - I with List - II. List - I List - II (A) No. of years pu… | Accountancy Part A CUET question

Match List - I with List - II.

List - I	List - II
(A) No. of years purchase	(I) Excess of average profit over normal profit
(B)Super profit	(II) Expected profit in the industry
(C) Normal profit	(III) Total profit divided by number of years
(D) Average profit	(IV) No. of years the firm continues to earn same profit

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → (A)-(IV), (B)-(I), (C)-(II), (D)-(III)

(A) No. of years purchase — this matches (IV) No. of years the firm continues to earn same profit. Goodwill is the profit (or super profit) for the years the benefit is expected to last.

(B) Super profit — this matches (I) Excess of average profit over normal profit.

(C) Normal profit — this matches (II) Expected profit in the industry. It is the normal return on capital employed in similar business.

(D) Average profit — this matches (III) Total profit divided by number of years.

NCERT (2026-27 edition):
Methods of Valuation of Goodwill – “… Suppose an existing firm earns Rs. 18,000 on the capital of Rs. 1,50,000 and the normal rate of return is 10%. The Normal profits will work out at Rs. 15,000 (1,50,000 × 10/100). The super profits in this case will be Rs. 3,000 (Rs. 18,000 – 15,000). The goodwill under the super profit method is ascertained by multiplying the super profits by certain number of years’ purchase. If, in the above example, it is expected that the benefit of super profits is likely to be available for 5 years in future, the goodwill will be valued at Rs. 15,000 (3,000 × 5).”

NCERT (2026-27 edition):
Methods of Valuation of Goodwill – “… But it is contended that the buyer’s real benefit does not lie in total profits; it is limited to such amounts of profits which are in excess of the normal return on capital employed in similar business. Therefore, it is desirable to value, goodwill on the basis of the excess profits and not the actual profits. The excess of actual profits over the normal profits is termed as super profits.”

NCERT (2026-27 edition):
Methods of Valuation of Goodwill – “… Under this method, the goodwill is valued at agreed number of ‘years’ purchase of the average profits of the past few years. It is based on the assumption that a new business will not be able to earn any profits during the first few years of its operations.”