Question

Meaning of number of years of purchase of goodwill

Answer 1

Answer:

Number of years' purchase is used to calculate the value of goodwill under average profit method and super profit method of valuation of goodwill. Normally, the need for valuation of goodwill arises at the time of sale of a business

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Answer 2

Explanation:

When we purchase a business we will have to pay for the goodwill along with the value of the net assets. Goodwill comes in existence after years of profitability. That is subjected to agreement between the buyer and the seller. This agreed number of years is the 'number of years purchase' which is used for valuation of goodwill.