Goodwill can also be ascertained by capitalising the super profit directly under which method? Option 1: Super Profit Method Option 2: Average Profit Method Option 3: Weighted Average Profit method Option 4: Capitalisation of Super Profit Method

Answer: Capitalisation of Super Profit Method. Solution: Under the Capitalisation of Super Profit Method, goodwill is calculated by directly capitalising the super profit. In this method, super profit is converted into its capital value by applying the normal rate of return as the capitalisation rate. The formula used is: Goodwill = (Super Profit x 100)/(Normal Rate of Return) or Goodwill = (Super Profit)/(Normal Rate of Return (in decimal)) For clarity, super profit is the excess of actual profit over normal profit, where: Super Profit = Actual Profit - Normal Profit Normal Profit = (Capital Employed x Normal Rate of Return)/100 The key distinction is that this method directly capitalizes (converts to capital value) the super profit, rather than multiplying it by a certain number of years as done in the Super Profit Method.

Partnership

Admission

Medium

common

Goodwill can also be ascertained by capitalising the super profit directly under which method?

Super Profit Method

Average Profit Method

Weighted Average Profit method

Capitalisation of Super Profit Method

✅ Correct Option: 4

Under the Capitalisation of Super Profit Method, goodwill is calculated by directly capitalising the super profit.

In this method, super profit is converted into its capital value by applying the normal rate of return as the capitalisation rate.

The formula used is:

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

$\text{Goodwill} = \frac{\text{Super Profit}}{\text{Normal Rate of Return (in decimal)}}$

For clarity, super profit is the excess of actual profit over normal profit, where:

$\text{Super Profit} = \text{Actual Profit} - \text{Normal Profit}$

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

The key distinction is that this method directly capitalizes (converts to capital value) the super profit, rather than multiplying it by a certain number of years as done in the Super Profit Method.

2026: 20 May Shift 1

At the time of admission of a new partner, if Profit and Loss Account debit balance exist in the books, then which of the following entry will be done in order to distribute it?

2022: 20 Aug Shift 2

The amount of salary to be shown in the Dr. side of P & L Appropriation A/C will be:

2026: 12 May Shift 1

Arrange the following steps for calculation of goodwill using the Super Profit Method:

(A) Calculate goodwill by multiplying the super profits by the given number of years' purchase.

(B) Calculate the super profits by deducting normal profit from the average profits.

(D) Calculate the average profit.

Choose the correct answer from the options given below:

2026: 29 May Shift 2

A newly admitted partner has a right to:

2026: 29 May Shift 1

A and B are partners sharing profits in the ratio of 2:3. They admitted C as a new partner for 1/5 share in the future profits of the firm. Calculate the new profit share of A.

2024

Kavita and Lalita are partners, sharing profits in the ratio of 2:1. They decide to admit Mohan for 1/4th share in profits with a guaranteed amount of ₹ 25,000. Both Kavita and Lalita undertake to meet the liability arising due to the guaranteed amount to Mohan in their respective profit sharing ratio. The firm earned profits of ₹ 76,000 for the year 2022-23. The deficiency borne by Kavita is:

Goodwill can also be ascertained by capitalising the super profit directly under which method?

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