The steps involved in calculation of Goodwill under Super Profit method are:
(A) Calculate the super profits by deducting normal profit from the average profits
(B) Calculate the normal profit on the firm's capital on the basis of the normal rate of return
(C) Calculate the average profit
(D) Calculate goodwill by multiplying the super profits by the given number of years' purchase
Choose the correct sequence of steps from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (C), (B), (A), (D)
The steps of the super profits method, in order:
(C) Calculate the average profit.
(B) Calculate the normal profit on the firm’s capital at the normal rate of return.
(A) Calculate the super profits by deducting normal profit from the average profits.
(D) Calculate goodwill by multiplying the super profits by the given number of years’ purchase.
NCERT (2026-27 edition): |