Maharashtra State BoardHSC Commerce 12th Board Exam
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Mahesh and Umesh Are Partners in a Partnership Firm Carrying on Business for the Last 10 Years. - Book Keeping and Accountancy

Mahesh and Umesh are partners in a partnership firm carrying on business for the last 10 years.

You are required to find out the value of goodwill which is to be valued at `(2)1/2` years purchase of last 6 years’ average profit.

The profit and losses for the six years are:

Year Amount
2003 – 2004 1,50,000 (Profit)
2004 – 2005 1,00,000 (Loss)  
2005 – 2006 4,50,000 (Profit)
2006 – 2007 5,00,000 (Profit)
2007 – 2008 50,000 (Loss)
2008 – 2009 5,50,000 (Profit)
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Calculation of Average Profit

Average profit = `\text{Total profit}/text\{Number of Years}`


Calculation of Goodwill

`\text{Goodwill of the firm}=\text{Average profit }xx\text{Number of the years'purchase}`

`=2,50,000xx(2)1/2= Rs\ 6,25,000`

Concept: Admission of a Partner - Treatment of Goodwill
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