Partnership

Admission

Easy

common

The books of a business showed that the firm's capital employed on December 31, 2015, is Rs. 5,00,000 and the profits for the last five years were: 2011–Rs. 40,000; 2012-Rs. 50,000; 2013-Rs. 55,000; 2014- Rs.70,000 and 2015-Rs. 85,000. Find out the normal profits of the business, given that the normal rate of return is 10%.

Rs. 70,000

Rs. 35,000

Rs. 50,000

Rs. 60,000

✅ Correct Option: 3

Normal Profits represent the profit that should be earned based on the capital employed at a normal rate of return in the industry.

The formula for Normal Profits is:

$\text{Normal Profits} = \text{Capital Employed} \times \frac{\text{Normal Rate of Return}}{100}$

Given:

Capital Employed = Rs. 5,00,000
Normal Rate of Return = 10%

Calculating Normal Profits:

$\text{Normal Profits} = 5,00,000 \times \frac{10}{100}$

$= 5,00,000 \times 0.10$

$= \text{Rs. 50,000}$

Note that the actual profits given for the five years (Rs. 40,000, Rs. 50,000, Rs. 55,000, Rs. 70,000, and Rs. 85,000) are not directly used to calculate normal profits. Normal profits depend only on the capital employed and the normal rate of return expected in the industry. These actual profits would be relevant for calculating average profits or super profits, but not for normal profits.

Answer: Option 3 - Rs. 50,000

2025: 27 May Shift 2

Which is not a method of valuation of goodwill

2026: 13 May Shift 1

Match List-I with List-II

List-I	List-II
(A) Intangible Asset	(I) Goodwill Valuation Method
(B) Nature of Business	(II) Characteristic of Goodwill
(C) Super Profit	(III) Factor affecting value of Goodwill
(D) Self-generated	(IV) Type of Goodwill

Choose the correct answer from the options given below:

2025: 27 May Shift 2

Vijay and Manohar share profits and losses in the ratio of 2:1. They admit Prakash as a partner with 1/4 share in profits with a guarantee that his share of profit will be at least Rs. 50,000. The net profit of the firm for the year ending March 31, 2015, was Rs. 1,60,000. Calculate the amount of profit Vijay will get.

2026: 31 May Shift 1

Navya and Nitya are partners sharing profits in the ratio 3 : 2, with capitals of ₹1,00,000 and ₹50,000 respectively. Hardik is admitted for a 1/5 share in profits, and is to bring in capital proportionate to his share, based on the combined capital of the firm after his admission. The amount Hardik will contribute as capital is:

2022: 16 July Shift 2

Identify from the following when goodwill is required to be calculated. Change in profit sharing ratio

A. Change in profit sharing ratio

B. Admission of a partner

C. Dissolution of Partnership firm

D. Amalgamation of partnership firms

E. Preparation of Balance Sheet

Choose the correct answer from the options given below:

2024

The journal entry for treatment of goodwill, when a new partner brings his share of goodwill in cash and one of the old partners gains, involves the following:

Solution

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