Match the following list 1 with list 2.
| LIST 1 | LIST 2 |
| A) Average profit | I) Capitalised value - Net assets |
| B) Goodwill | II) Normal profit x Weight assigned |
| C) Weighted profit | III) Total assets - Liabilities |
| D) Net asset of firm | IV) Super profit + normal profit |
Choose the correct answer from the options given below.
Answer & explanation
Correct answer: option 3
The correct answer is option 3- A-IV, B-I, C-II, D-III.
| LIST 1 | LIST 2 |
| A) Average profit | IV) Super profit + normal profit |
| B) Goodwill | I) Capitalised value - Net assets |
| C) Weighted profit | II) Normal profit x Weight assigned |
| D) Net asset of firm | III) Total assets - Liabilities |
* Average profit- Super profit = Average profit - Normal profit. So, Average profit is super profit + normal profit.
* Goodwill is calculated by many methods. One of the method is capitalisation of average profit in which the formula for calculating goodwill is Total capitalised value of firm - net assets.
* Weighted profit is calculated to calculated goodwill through the weighted average profit method. Weighted profit is calculated by the formula- profit x weight assigned. After calculation of weighted profit, it is totalled and divided by total of weights so calculated weighted average profit which is later multiplied by no of years purchase to calculate value of goodwill.
* Net assets of the firm can be calculated by subtracting liabilities of the firm from the total assets of the firm.