M/s XYZ & Co. earn an average profit of Rs. 48,000 with a closing capital of Rs. 5,00,000. The normal rate of return in a similar business is 8%. Using the capitalisation of super profits method, the value of the goodwill of the firm will be:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 1,00,000
Under the capitalisation of super profits method, goodwill is the capital that would earn the super profit at the normal rate of return: goodwill = super profit × 100 ÷ normal rate of return.
Normal profit = Rs. 5,00,000 × 8% = Rs. 40,000
Super profit = Rs. 48,000 − Rs. 40,000 = Rs. 8,000
Goodwill = Rs. 8,000 × 100/8 = Rs. 1,00,000
Note: NTA picked this question from an NCERT (2026-27) illustration and changed the figures. Do not ignore NCERT while practising numericals.
NCERT (2026-27 edition):
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