Which of the following is not one of the method of valuation of goodwill? Option 1: Average profit method Option 2: Super profit method Option 3: Average Capitalisation weighted method Option 4: Capitalisation method

Answer: Average Capitalisation weighted method. Solution: The standard methods for valuation of goodwill are: Average Profit Method: Goodwill = Average Profit × Number of Years' Purchase This method calculates goodwill by multiplying the average maintainable profit by an agreed number of years. Super Profit Method: Goodwill = Super Profit × Number of Years' Purchase where Super Profit = Actual Average Profit - Normal Profit This method considers only the excess profit earned over and above the normal profit. Capitalisation Method: This has two approaches: a) Capitalisation of Average Profit: - Total Capital Required = (Average Profit × 100)/(Normal Rate of Return) - Goodwill = Total Capital Required - Actual Capital Employed b) Capitalisation of Super Profit: - Goodwill = (Super Profit × 100)/(Normal Rate of Return) Average Capitalisation Weighted Method is not a recognized method of goodwill valuation. The term "weighted average" is used while calculating average profits (such as in weighted average profit method), but there is no separate method called "Average Capitalisation Weighted Method" for goodwill valuation. Therefore, Option 3 is the correct answer as it does not represent a valid method of goodwill valuation.

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Which of the following is not one of the method of valuation of goodwill?

Average profit method

Super profit method

Average Capitalisation weighted method

Capitalisation method

✅ Correct Option: 3

The standard methods for valuation of goodwill are:

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

This method calculates goodwill by multiplying the average maintainable profit by an agreed number of years.

Super Profit Method: Goodwill = Super Profit × Number of Years' Purchase

where Super Profit = Actual Average Profit - Normal Profit

This method considers only the excess profit earned over and above the normal profit.

Capitalisation Method: This has two approaches:

a) Capitalisation of Average Profit:

Total Capital Required = $\frac{\text{Average Profit × 100}}{\text{Normal Rate of Return}}$
Goodwill = Total Capital Required - Actual Capital Employed

b) Capitalisation of Super Profit:

Goodwill = $\frac{\text{Super Profit × 100}}{\text{Normal Rate of Return}}$

Average Capitalisation Weighted Method is not a recognized method of goodwill valuation. The term "weighted average" is used while calculating average profits (such as in weighted average profit method), but there is no separate method called "Average Capitalisation Weighted Method" for goodwill valuation.

Therefore, Option 3 is the correct answer as it does not represent a valid method of goodwill valuation.

2025: 30 May Shift 2

Arrange the following steps for calculating Goodwill under Capitalisation of Average Profits Method in correct sequence-

(A). Ascertain the actual firm's capital (net assets) by deducting outside liabilities from the total assets.

(B). Compute the value of goodwill by deducting net assets from the capitalised value of average profits.

(C). Ascertain the average profits based on the past few years' performance.

(D). Capitalize the average profits on the basis of the normal rate of return to ascertain the capitalised value of average profits.

Choose the correct answer from the options given below:

2025: 26 May Shift 2

A and B are partners in a firm sharing profits in the ratio of 3:2. They admitted M as a new partner for 1/4 share. The new profit sharing ratio between A and B will be 2:1. Calculate their sacrificing ratio.

2024

On the date of admission of a partner there was a balance of ₹ 45,000 in the account of machinery. It was found undervalued by 10%. The value of machinery will appear in the new Balance Sheet at:

2025: 15 May Shift 1

Which of the following is not the main factors affecting the value of Goodwill?

2026: 21 May Shift 1

Arrange the sequence of following important adjustments which require attention at the time of admission of a new partner.

(A) Valuation and adjustment of goodwill

(B) Balance sheet of Reconstituted firm

(D) New profit sharing ratio and Sacrificing ratio

Choose the correct answer from the options given below:

2025: 30 May Shift 2

A, B and C are partners in a firm. If D is admitted as a new partner then:

Which of the following is not one of the method of valuation of goodwill?

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