Question

Dipu and Raju were partners in a firm. Following balances were appearing in the books of the firms:

Particulars	₹
Dipu's Capital A/c	3,80,000
Raju's Capital A/c	2,90,000
Dipu's Current A/c (Dr.)	20,000
Raju's Current A/c	50,000
Profit & Loss A/c (Dr.)	10,000
Deferred Revenue Expenditure	15,000

Profits for last three years ended 31st March, were:

2024	₹ 95,000 (including gain of ₹ 5,000 from sale of Machinery)
2025	₹ 72,000 (including loss of a vehicle destroyed by an accident on 31st March, 2025, ₹ 24,000)
2026	₹ 1,20,000 (includes overvaluation of stock by ₹ 12,000)

Calculate Goodwill of the firm by Capitalisation of Super Profit Method; if normal rate of return in the similar business is 8% р.а.

Answer 1

By using Capitalisation of Super Profit Method.

1. Capital Employed

Given:

• Dipu’s Capital = ₹ 3,80,000
• Raju’s Capital = ₹ 2,90,000
• Dipu’s Current A/c (Dr.) = ₹ 20,000
• Raju’s Current A/c = ₹ 50,000
• Profit & Loss A/c (Dr.) = ₹ 10,000
• Deferred Revenue Expenditure = ₹ 15,000

Capital employed:

₹ 3,80,000 + ₹ 2,90,000 − ₹ 20,000 + ₹ 50,000 − ₹ 10,000 − ₹ 15,000

= ₹ 6,75,000

2. Adjusted Profits

For 2024:

Reported profit = ₹ 95,000

It includes abnormal gain on sale of machinery = ₹ 5,000.

₹ 95,000 − ₹ 5,000 = ₹ 90,000

For 2025:

Reported profit = ₹ 72,000

It includes abnormal loss due to vehicle destroyed = ₹ 24,000.

₹ 72,000 + ₹ 24,000 = ₹ 96,000​

For 2026:

Reported profit = ₹ 1,20,000

Stock was overvalued by ₹ 12,000, which means profit was overstated.

₹ 1,20,000 − ₹ 12,000 = ₹ 1,08,000

3. Average Profit

`(₹ 90,000 + ₹ 96,000 + ₹ 1,08,000)/3`

= `(₹ 2,94,000)/3`

= ₹ 98,000

4. Normal Profit

Normal rate of return = 8%

₹ 6,75,000 × `8/100`

= ₹ 54,000

5. Super Profit

Super Profit = Average Profit − Normal Profit

= ₹ 98,000 − ₹ 54,000 = ₹ 44,000​

6. Goodwill by Capitalisation of Super Profit

Goodwill= `"Super Profit × 100"/"Normal rate of Return"`

= `(44,000 xx 100)/8`

= ₹ 5,50,000