Partnership

Admission

Easy

common

The past average profits of a business works out at Rs. 20,000 and it is expected that such profits are likely to continue for another three years, the value of goodwill based on average profit method will be....... .

Rs.60,000.

Rs.20,000.

Rs.40,000.

Rs.50,000.

✅ Correct Option: 1

Under the Average Profit Method, goodwill is calculated by multiplying the average profit with the agreed number of years of purchase.

Formula: Goodwill = Average Profit × Number of Years' Purchase

Given information:

Average Profit = Rs. 20,000
Number of years for which profits are expected to continue = 3 years

Applying the formula:

Goodwill = Rs. 20,000 × 3

Goodwill = Rs. 60,000

The number of years' purchase represents the period for which the buyer is willing to pay for the future profit-earning capacity of the business. Since the profits are expected to continue for 3 years, the goodwill is valued at 3 times the average annual profit.

Correct Option: 1 (Rs. 60,000)

2025: 16 May Shift 1

At the time of Reconstitution, Goodwill already appearing in books of accounts is distributed among partners in_______.

2026: 24 May Shift 1

Asif and Chinmay are partners in a firm sharing profits and losses in the ratio of 5:4. They decide to share future profits in the ratio of 2:3. At that time, the goodwill appearing in the books of the firm will be written-off in :

2026: 11 May Shift 1

In case of admission of a partner, any accumulated losses appearing in the form of a debit balance of profit and loss account and/or deferred revenue expenditure appearing in the balance sheet of the firm, should be transferred to __________.

2022: 15 July Shift 2

P, Q & R were partners sharing profit in the ratio 4:3:3. W was admitted to the partnership, bringing 1,00,000 capital and Rs. 24,000 as his share of Goodwill. Choose the correct entry for retaining of Goodwill brought in by W. W's share in profit was $\frac{1}{4}$ th

2025: 14 May Shift 1

The capitals of other partners are also to be adjusted in the ratio of their respective shares in profits. A will bring in cash as capital after adjustment amount:

2026: 29 May Shift 2

Match the LIST-I with LIST-II

LIST-I		LIST-II
A.	General Reserve	I.	Old Share - New Share
B.	Sacrificing Ratio	II.	Credit to Revaluation A/c
C.	Increase in value of Asset	III.	Debit to Revaluation A/c
D.	Increase in value of Liability	IV.	Accumulated Profit

Choose the correct answer from the options given below:

The past average profits of a business works out at Rs. 20,000 and it is expected that such profits are likely to continue for another three years, the value of goodwill based on average profit method will be....... .

Solution

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CUET Accountancy Past Year Questions (Topic-Wise)