Question

Jay and Vijay were partners sharing profits and losses equally. They decided to share future profits in the ratio of 3 : 2 w.e.f. 1st April, 2026.

From the following Balance Sheet as at 31st March, 2026, calculate the value of goodwill on the basis of Capitalisation of Super Profit Method if the normal rate of return is 10% and average profit is ₹ 1,80,000.

Liabilities	₹	₹	Assets	₹
Capital Accounts:			Goodwill	2,30,000
Jay	8,15,000		Computers	3,40,000
Vijay	6,55,000	14,70,000	Furniture	2,00,000
Profit & Loss A/c		1,40,000	Investments (Non-trade)	1,65,000
Sundry Creditors		3,80,000	Stock	4,70,000
Outstanding Rent		1,10,000	Sundry Debtors	6,37,000
			Cash at Bank	23,000
			Advertisement Suspense	35,000
		21,00,000		21,00,000

Answer 1

By using Capitalisation of Super Profit Method.

Given:

Average Profit = ₹ 1,80,000

Normal Rate of Return = 10%

1. Calculate Capital Employed

We first find the partners' funds:

Jay’s Capital = ₹ 8,15,000

Vijay’s Capital = ₹ 6,55,000

Profit & Loss A/c (Cr.) = ₹ 1,40,000

Therefore:

₹ 8,15,000 + ₹ 6,55,000 + ₹ 1,40,000 = ₹ 16,10,000

Now deduct assets that are not included in capital employed for business operations:

Existing Goodwill = ₹ 2,30,000

Non-trade Investments = ₹ 1,65,000

Advertisement Suspense A/c = ₹ 35,000

Total deductions:

₹ 2,30,000 + ₹ 1,65,000 + ₹ 35,000 = ₹ 4,30,000

Hence:

Capital Employed = ₹ 16,10,000 − ₹ 4,30,000 

= ₹ 11,80,000​

2. Calculate Normal Profit

Normal Profit = Capital Employed × `"Normal Rate"/100`

= ₹ 11,80,000 × `10/100`

= ₹ 1,18,000​

3. Calculate Super Profit

Super Profit = Average Profit − Normal Profit

= ₹ 1,80,000 − ₹ 1,18,000 = ₹ 62,000​

4. Calculate Goodwill

Under Capitalisation of Super Profit Method:

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

= `(60,000 xx 100)/100`

= ₹ 6,20,000