For computing Goodwill by capitalisation of Average Profit method, the following sequence would be followed:
A. Capitalise the average profit on the basis of Normal Rate of Return
B. Ascertain the firm's Capital - Total Assets - Outside Liabilities
C. Ascertain the average profits based on past years' performance
D. Compute the volume of Goodwill
Choose the correct answer from the options given below:

C, A, B, D

Capitalisation of Average Profits: Under this method, the value of goodwill is ascertained by deducting the actual firm’s capital in the business from the capitalized value of the average profits on the basis of normal rate of return. This involves the following steps:
(i) Ascertain the average profits based on the past few years’ performance.
(ii) Capitalize the average profits on the basis of the normal rate of return to ascertain the capitalised value of average profits as follows: Average Profits × 100/Normal Rate of Return
(iii) Ascertain the actual firm’s capital (net assets) by deducting outside liabilities from the total assets (excluding goodwill and ficticious assets). Firms’ Capital = Total Assets (excluding goodwill) – Outside Liabilities
(iv) Compute the value of goodwill by deducting net assets from the capitalised value of average profits, i.e. (ii) – (iii).