Which is not a method of valuation of goodwill?

The correct answer is Option (2) → Adjusted Profit Method

Goodwill is valued by three recognised methods: the average profits method, the super profits method and the capitalisation method. There is no “adjusted profit method” of valuing goodwill; profits may be adjusted for abnormal items before averaging, but that is a step inside the average profits method, not a method of its own.

Option (1) Capitalization Method — A method of valuing goodwill. Goodwill is the capitalised value of average profits less net assets, or the super profits capitalised directly.

Option (3) Super Profit Method — A method of valuing goodwill. Goodwill is a number of years' purchase of the profits earned above the normal profit.

Option (4) Average Profit Method — A method of valuing goodwill. Goodwill is a number of years' purchase of the average profits of past years.