The correct sequence involved in calculation of goodwill by weighted average profit method is :
A. Adjust the profit taking into account abnormal gain/loss.
B. Multiply the weighted average profit by number of years of purchase.
C. Assign weight to each year's profit
D. Find out weighted average profit by dividing total weighted profit by total weight.
E. Find out weighted profit.
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → A, C, E, D, B
(A) Adjust the profit taking into account abnormal gain/loss. — first get the normal profit of each year.
(C) Assign weight to each year's profit — higher weights to recent years.
(E) Find out weighted profit. — profit × weight for each year.
(D) Find out weighted average profit by dividing total weighted profit by total weight.
(B) Multiply the weighted average profit by number of years of purchase. — this gives goodwill.
NCERT (2026-27 edition): NCERT (2026-27 edition):
NCERT (2026-27 edition):
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