Match List I with List II List - I List - II (A) Normal Rate of Retur… | Accountancy Part A CUET question

Match List I with List II

List - I	List - II
(A) Normal Rate of Return	(I) Total Assets - Outside Liabilities
(B) Number of years purchase	(II) Usual return on capital employed
(C) Capital Employed	(III) Return over and above usual return in similar business
(D) Super Profit	(IV) Expected period for which returns are anticipated to accrue

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → (A)-(II), (B)-(IV), (C)-(I), (D)-(III)

These terms are used in valuing goodwill by the super profits and capitalisation methods.

(A) Normal Rate of Return — this matches (II) Usual return on capital employed. It is the return that similar businesses normally earn.
(B) Number of years purchase — this matches (IV) Expected period for which returns are anticipated to accrue. It is the number of years the extra profits are expected to last.
(C) Capital Employed — this matches (I) Total Assets - Outside Liabilities. It is the net assets of the firm, leaving out goodwill and fictitious assets.
(D) Super Profit — this matches (III) Return over and above usual return in similar business. It is actual profit minus normal profit.

NCERT (2026-27 edition):
Methods of Valuation of Goodwill – “… But it is contended that the buyer’s real benefit does not lie in total profits; it is limited to such amounts of profits which are in excess of the normal return on capital employed in similar business. Therefore, it is desirable to value, goodwill on the basis of the excess profits and not the actual profits. The excess of actual profits over the normal profits is termed as super profits.”

NCERT (2026-27 edition):
Methods of Valuation of Goodwill – “… 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).”

NCERT (2026-27 edition):
Methods of Valuation of Goodwill – “… (iii) Ascertain the actual firm’s capital (net assets) by deducting outside liabilities from the total assets (excluding goodwill and ficticious assets).”