CUET Preparation Today
| Which method is used for valuation of goodwill if profits of the partnership firm are showing increasing or decreasing trend? |
Average profit method Super profit method Weighted average profit method Capitalisation of Super profit method |
| Weighted average profit method |
| Sometimes, if there exists an increasing or decreasing trend, it is considered to be better to give a higher weightage to the profits to the recent years than those of the earlier years. Hence,it is a advisable to work out weighted average based on specified weights like 1, 2, 3, 4 for respective year’s profit. However, weighted average should be used only if specified. |
