Which among the following is Not the method of valuation of goodwill: Option 1: Capitalisation Method Option 2: Super Profit Method Option 3: Normal Profit Method Option 4: Average Profit Method

Answer: Normal Profit Method. Solution: Goodwill can be valued using various methods recognized in accounting. Let me clarify which one is not a valuation method: Methods of Goodwill Valuation: Average Profit Method - Goodwill is calculated as: Average Profit × Number of Years' Purchase. This is a valid method. Super Profit Method - Goodwill is calculated based on super profits, which is the excess of actual average profit over normal profit. Super Profit = Average Profit - Normal Profit. This is a valid method. Capitalisation Method - This method uses capitalization to value goodwill in two ways: - Capitalisation of Average Profit, or - Capitalisation of Super Profit This is a valid method. Normal Profit Method - This is NOT a method of goodwill valuation. Normal profit is merely a concept used in the Super Profit Method as a benchmark for comparison. It represents the profit that a firm should earn based on the capital employed at a normal rate of return. Normal Profit = Capital Employed × Normal Rate of Return/100 While normal profit helps in calculating super profit, it is not an independent method for valuing goodwill itself. It's simply a calculation used within another method. Therefore, Normal Profit Method is not a method of goodwill valuation.

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Which among the following is Not the method of valuation of goodwill:

Capitalisation Method

Super Profit Method

Normal Profit Method

Average Profit Method

✅ Correct Option: 3

Goodwill can be valued using various methods recognized in accounting. Let me clarify which one is not a valuation method:

Methods of Goodwill Valuation:

Average Profit Method - Goodwill is calculated as: Average Profit × Number of Years' Purchase. This is a valid method.

Super Profit Method - Goodwill is calculated based on super profits, which is the excess of actual average profit over normal profit. Super Profit = Average Profit - Normal Profit. This is a valid method.

Capitalisation Method - This method uses capitalization to value goodwill in two ways:

Capitalisation of Average Profit, or
Capitalisation of Super Profit

This is a valid method.

Normal Profit Method - This is NOT a method of goodwill valuation. Normal profit is merely a concept used in the Super Profit Method as a benchmark for comparison. It represents the profit that a firm should earn based on the capital employed at a normal rate of return.

Normal Profit = Capital Employed × Normal Rate of Return/100

While normal profit helps in calculating super profit, it is not an independent method for valuing goodwill itself. It's simply a calculation used within another method.

Therefore, Normal Profit Method is not a method of goodwill valuation.

2025: 4 June Shift 2

A and B are partners sharing profits in the ratio of 2:1. C is admitted into the firm for 1/4 share of profits. C brings in Rs. 20,000 in respect of his capital. The capitals of old partners A and B, after all adjustments relating to goodwill, revaluation of assets and liabilities, etc., are Rs. 45,000 and Rs. 15,000 respectively, It is agreed that partners' capitals should be according to the new profit sharing ratio. A's Capital in the new firm will be:

2025: 26 May Shift 2

Sameer and Yasmin are partners with capitals of Rs 15,00,000 and Rs 10,00,000 respectively. They agreed to share profits in the ratio of 3:2. The books are closed on March 31, every year. They admit Ravi on October 1, 2019 in the partnership, who bring Rs 12,00,000 as capital and Sameer also introduced additional capital Rs 3,00,000 on that date. Interest on partner's capital is provided @5% p.a. The amount of interest on the capital of Sameer for the year 2019-20 is-

2026: 23 May Shift 2

Goodwill already exist in the books is written off by:

2026: 11 May Shift 2

Match the LIST-I with LIST-II

LIST-I		LIST-II
A. Increase in the value of each asset will be shown	I.	it indicates net gain, which will be transferred to the capital accounts of the old partners in old ratio.
B. If the closing balance of revaluation account shows a credit balance then	II.	it indicates net loss which will be transferred to the capital accounts of the old partners in old ratio.
C. Decrease in the value of each asset will be shown	III.	on credit side of Revaluation account
D. If the closing balance of revaluation account shows a debit balance then	IV.	on debit side of Revaluation account

Choose the correct answer from the options given below:

2026: 12 May Shift 1

Sachin and Sohail, are partners, sharing profits in the ratio of 2:1. Sonam is admitted into the firm for 1/4 share of profits. Sonam brings in Rs. 20,000 in respect of his capital. The capitals of old partners, Sachin and Sohail, after all adjustments relating to goodwill, revaluation of assets and liabilities, etc., are Rs. 45,000 and Rs. 15,000 respectively. It is agreed that partners capital should be according to the new profit-sharing ratio. What would be the new profit sharing ratio of Sachin, Sohail, and Sonam?

2026: 12 May Shift 1

Which of the following is not a purpose of a firm preparing a Revaluation Account?

Which among the following is Not the method of valuation of goodwill:

Solution

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