MyQuestionIcon

10

You visited us 10 times! Enjoying our articles? Unlock Full Access!

Average Profit Method

While calcula...

Question

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

A

None of these

No worries! We‘ve got your back. Try BYJU‘S free classes today!

B

multiplied

No worries! We‘ve got your back. Try BYJU‘S free classes today!

C

deducted

Right on! Give the BNAT exam to get a 100% scholarship for BYJUS courses

D

added

No worries! We‘ve got your back. Try BYJU‘S free classes today!

Open in App

Solution

The correct option is C
deducted

Abnormal income of a year should be deducted out of the net profit of that year.

Suggest Corrections

thumbs-up

3

Similar questions

While calculating goodwill by weighted average profits methods, total profits multiplied by weights are divided by___

Q. Manbir and Nimrat are partners and they admit Anahat into partnership. It was agreed to value goodwill at three tears' purchase on Weighted Average Profit Method taking profits of last five years. Weights assigned to each year as 1, 2, 3, 4 and 5 respectively to profit for the year ended 31st March, 2014 to 2108. The profit for these years were: ₹ 70,000, ₹ 1,40,000, ₹ 1,00,000, ₹ 1,60,000 and ₹ 1,65,000 respectively.
Scrutiny of books of account revealed following information:
(i) There was an abnormal loss of ₹ 20,000 in the year ended 31st March, 2014.
(ii) There was an abnormal gain (profit) of ₹ 30,000 in the year ended 31st March, 2015.
(iii) Closing Stock as on 31st March, 2017 was overvalued by ₹ 10,000.
Calculate the value of goodwill.

Q. Manbir and Nimrat are partners and they admit Anahat into partnership. It was agreed to value goodwill at three years' purchase on Weighted Average Profit Method taking profits of last five years. Weights assigned to each year as 1, 2, 3, 4 and 5 respectively to profits for the year ended 31st March, 2015 to 2019. The profits for these years were: ₹ 70,000, ₹ 1,40,000, ₹ 1,00,000, ₹ 1,60,000 and ₹ 1,65,000 respectively.
Scrutiny of books of account revealed following information:
(i) There was an abnormal loss of ₹ 20,000 in the year ended 31st March, 2015.
(ii) There was an abnormal gain (profit) of ₹ 30,000 in the year ended 31st March, 2016.
(iii) Closing Stock as on 31st March, 2018 was overvalued by ₹ 10,000.
Calculate the value of goodwill.

Profits of last four years are 12,000, 16,000, 23,000, 27,000 respectively. Calculate goodwill based on average profits of 2 years purchase

Q. If normal profit is

R s .50000

, average profit is

R s .75000

than calculate Goodwill for

2

years of purchase under super profit method_______.

View More

Join BYJU'S Learning Program

similar_icon

Related Videos

lock

Valuation of Goodwill

ACCOUNTANCY

Watch in App

explore_more_icon

Explore more

Average Profit Method

Standard XII Accountancy

Join BYJU'S Learning Program

CrossIcon