Which of the following is not one of the method of valuation of goodwill?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Average Capitalisation weighted method
Goodwill is valued by the average profits method, the super profits method or the capitalisation method (capitalising either the average profits or the super profits). A weighted average may be used inside the average profits method, but there is no method called “Average Capitalisation weighted method”; the name mixes words from different methods.
Option (1) Average profit method — A method of valuing goodwill. Goodwill = average profit × agreed number of years’ purchase.
Option (2) Super profit method — A method of valuing goodwill. Goodwill = super profit (average profit less normal profit) × number of years’ purchase.
Option (4) Capitalisation method — A method of valuing goodwill. Average or super profits are capitalised at the normal rate of return.
NCERT (2026-27 edition):
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