Accountancy Part AAdmission of a Partner

A firm's capital is ₹2,00,000. The normal rate of return on firm capi…

A firm's capital is ₹2,00,000. The normal rate of return on firm capital is 15%. During the year, the firm earned a profit of ₹48,000. Calculate goodwill on the basis of 3 years purchase of super profit.

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → ₹54,000

Under the super profit method, goodwill = super profit × number of years’ purchase, where super profit is the actual profit less the normal profit on the capital employed.

Normal profit = ₹2,00,000 × 15/100 = ₹30,000
Super profit = ₹48,000 − ₹30,000 = ₹18,000
Goodwill = ₹18,000 × 3 = ₹54,000

NCERT (2026-27 edition):
Super Profits Method – “… 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).”