Question

a and b are the partner in a firm. the capital employed of the firm is ₹500000 and the normal rate of return is 10% per annum. annual salary of each partner is 8000 the average profit was ₹80000 for the last 10 years . calculate the value of goodwill by super profit capitalisation method​

Answer 1

Answer:

Average profit = ₹80,000

Capital employed = ₹5,00,000

Normal rate of return = 10%

Normal profit = ₹5,00,000 × 10/100

= ₹50,000

Super Profit = ₹80,000 - ₹50,000

= ₹30,000

So, Value of goodwill under capitalisation of super profit = ₹30,000 × 100/10 = ₹3,00,000.

Explanation:

Note - Partners' salary is an appropriation and it is only charged on net profit or after calculating net profit and in goodwill treatment we use Net profit, not distributable profit.