In average profit method, goodwill is calculated on the basis of ___

None of the above

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Current years` profits

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Future years` profits

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Past years` profits

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Solution

The correct option is D
Past years` profits

In average profit method, goodwill is calculated on the basis of past years` profits.

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Similar questions

A partnership firm earned net profits during the last 3 years as follows:

2007 - Rs. 1,90,000

2008 - Rs. 2,20,000

2009 - Rs. 2,50,000

Calculate the value of goodwill on the basis of 2 years’ purchase of average profits basis during the above mentioned 3 years.

While calculating goodwill by average profits method, any abnormal income of a year should be ___out of the net profit of that year.

5

R s .60, 000

R s .67, 500

R s .52, 500

R s .75, 000

R s .60, 000

5

3

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