Question

What is goodwill explain the method of valuation of goodwill12 class?

Answer 1

goodwill is a reputation in the business. and it is a asset.

Answer 2

Goodwill is an intangible asset which places an enterprise at an advantageous position due to which the enterprise is able to earn higher profits without putting extra efforts. Because the efforts made in the past put the Enterprise in the advantages positions. For example, if the enterprise has rendered good services to its customer the customer will be satisfied from the quality of the service which is all likelihood, will bring them back to the Enterprise. Inturn ,the enterprise will achieve higher sales and those high profit.

There are three methods for the valuation of goodwill :

1.average profit method

2. super profit method

3. capitalisation method