Arrange the following steps being used in calculating goodwill of the firm by Capitalisation of Super Profits.
A. Calculate normal profits on capital employed and average profit for past years.
B. Multiply the super profits by the required rate of return multiplier, i.e. Goodwill = Super Profits × 100/Normal Rate of Return
C. Calculate super profits by deducting normal profits from average profits.
D. Calculate capital of the firm, which is equal to total assets (excluding goodwill and fictitious assets) minus outside liabilities
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → D, A, C, B
(D) Calculate capital of the firm, which is equal to total assets (excluding goodwill and fictitious assets) minus outside liabilities
(A) Calculate normal profits on capital employed and average profit for past years.
(C) Calculate super profits by deducting normal profits from average profits.
(B) Multiply the super profits by the required rate of return multiplier, i.e. Goodwill = Super Profits × 100/Normal Rate of Return
NCERT (2026-27 edition):
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