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Question
The _______ of actual profits over the normal profits is termed as super profits.
The _______ of actual profits over the normal profits is termed as super profits.
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Solution
The correct option is B excess
Under super profits method, goodwill is calculated by multiplying no. of years purchased with super profits. It is desirable to value, goodwill on the basis of excess profits and not the actual profits. The excess of actual profits over the normal profits is termed as super profits.
Under super profits method, goodwill is calculated by multiplying no. of years purchased with super profits. It is desirable to value, goodwill on the basis of excess profits and not the actual profits. The excess of actual profits over the normal profits is termed as super profits.
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