Question

explain average profit method

Answer 1

Average Profits Method. Under this method, goodwill is calculated on the basis of the average of certain agreed number of past years' profits. The average is then multiplied by the agreed number of years of purchase. This is the simplest and the most commonly used method of the valuation of goodwill.

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Answer 2

⚫⛤✴✴⛤✴⛤✴☚✴⛤✴⛤✴☛☞☟
✔⛤⚫☛Average Profits Method. Under this method, goodwill is calculated on the basis of the average of certain agreed number of past years' profits. The average is then multiplied by the agreed number of years of purchase. This is the simplest and the most commonly used method of the valuation of goodwill.
⛤⛤⛤⛤⚫⛤⚫⚫⛤⚫⚫⛤Or⚫⚫⚫⛤✔
✔⛤⚫average profit method ☛ Under this method the value of Goodwill is calculated by multiplying the Average Future profit by a certain number of year's purchase. The first step under this method is the calculation of average profit based on past few years' profit.
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