Partnership

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The profit for the five years of a firm are as follows:

Year Profit (Rs.)
2013 4,00,000
2014 3,98,000
2015 4,50,000
2016 4,45,000
2017 5,00,000

Calculate goodwill of the firm on the basis of 4 years purchase of 5 years average profits.

Year	Profit (Rs.)
2013	4,00,000
2014	3,98,000
2015	4,50,000
2016	4,45,000
2017	5,00,000

Rs. 16,20,500

Rs. 17,54,400

Rs. 18,24,800

Rs. 15,12,900

✅ Correct Option: 2

The goodwill is calculated using the formula:

Goodwill = Average Profit × Number of Years' Purchase

Calculating Average Profit:

Total Profit = Rs. 4,00,000 + Rs. 3,98,000 + Rs. 4,50,000 + Rs. 4,45,000 + Rs. 5,00,000

Total Profit = Rs. 21,93,000

Average Profit = $\frac{\text{Total Profit}}{\text{Number of Years}}$ = $\frac{\text{Rs. 21,93,000}}{5}$ = Rs. 4,38,600

Calculating Goodwill:

Number of Years' Purchase = 4 years

Goodwill = Rs. 4,38,600 × 4 = Rs. 17,54,400

The 4 years' purchase means the goodwill is valued at 4 times the average annual profit. This represents the price a buyer would pay for the firm's reputation and established customer base, calculated as four years' worth of the average profits earned.

2025: 14 May Shift 1

At the time of admission of a partner, undistributed profits appearing in the balance sheet of the old firm is transferred to the capital account of:

2026: 31 May Shift 1

At the time of admission of a new partner, goodwill is adjusted because:

2022: 20 July Shift 1

Value of stock to be shown in Balance sheet after admission will be :

2026: 6 June Shift 1

Arrange the following steps in the correct sequence after admission of a new partner:

(A) Revaluation of Assets and Liabilities

(B) Calculation of New Profit Sharing Ratio and Sacrificing Ratio

(D) Distribution of Accumulated Profits and Reserves in the capital accounts

2026: 23 May Shift 2

The profits for the past five years of a firm are as follows: 2021 - Rs. 4,50,000; 2022 - Rs. 3,20,000; 2023 - Rs. 3,50,000; 2024 - Rs. 4,30,000 and 2025 - Rs. 3,00,000. What will be the amount of goodwill of the firm on the basis of three years purchase of five years average profits?

2026: 12 May Shift 1

Hem and Nem are partners in a firm sharing profits in the ratio of 3:2. Their capitals were Rs. 80,000 and Rs. 50,000 respectively. They admitted Sam on Jan. 1, 2025 as a new partner for 1/5 share in the future profits. Sam brought Rs. 60,000 as his capital and does not bring his share of goodwill in cash. Choose the correct journal entry from the following:

Particulars	Dr. Amount	Cr. Amount
Sam's Current A/c Dr.	34,000
To Hem's Capital A/c		20,400
To Nem's Capital A/c		13,600

Particulars	Dr. Amount	Cr. Amount
Sam's Current A/c Dr.	22,000
To Hem's Capital A/c		13,200
To Nem's Capital A/c		8,800

Particulars	Dr. Amount	Cr. Amount
Sam's Capital A/c Dr.	22,000
To Hem's Capital A/c		13,200
To Nem's Capital A/c		8,800

Particulars	Dr. Amount	Cr. Amount
Sam's Current A/c Dr.	22,000
To Hem's Current A/c		13,200
To Nem's Current A/c		8,800

The profit for the five years of a firm are as follows: YearProfit (Rs.)20134,00,00020143,98,00020154,50,00020164,45,00020175,00,000 Calculate goodwill of the firm on the basis of 4 years purchase of 5 years average profits.

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CUET Accountancy Past Year Questions (Topic-Wise)

The profit for the five years of a firm are as follows:

Year Profit (Rs.)
2013 4,00,000
2014 3,98,000
2015 4,50,000
2016 4,45,000
2017 5,00,000

Calculate goodwill of the firm on the basis of 4 years purchase of 5 years average profits.