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Chapters
2: Accounts of not–for–profit organisation
3: Accounts of partnership firms–fundamentals
▶ 4: Goodwill in partnership accounts
5: Admission of a partner
6: Retirement and death of a partner
7: Company accounts
8: Financial Statement Analysis
9: Ratio Analysis
10: Computerised Accounting system-Tally
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Solutions for Chapter 4: Goodwill in partnership accounts
Below listed, you can find solutions for Chapter 4 of Tamil Nadu Board of Secondary Education Samacheer Kalvi for Accountancy [English] Class 12 TN Board.
Samacheer Kalvi solutions for Accountancy [English] Class 12 TN Board 4 Goodwill in partnership accounts Multiple choice questions [Pages 131 - 132]
Choose the correct answer
Which of the following statements is true?
Goodwill is an intangible asset
Goodwill is a current asset
Goodwill is a fictitious asset
Goodwill cannot be acquired
Super profit is the difference between _____________.
Capital employed and average profit
Assets and liabilities
Average profit and normal profit
Current year’s profit and average profit
The average rate of return of similar concerns is considered as __________.
Average profit
Normal rate of return
Expected rate of return
None of these
Which of the following is true?
Super profit = `"Total profit"/"Number of years"`
Super profit = `"Weighted profit"/"Number of years"`
Super profit = Average profit – Normal profit
Super profit = Average profit × Years of purchase
Identify the incorrect pair
Goodwill under Average profit method - Average profit × Number of years of purchase
Goodwill under Super profit method - Super profit × Number of years of purchase
Goodwill under Annuity method - Average profit × Present value annuity factor
Goodwill under Weighted average profit method - Weighted average profit × Number of years of purchase
When the average profit is ₹ 25,000 and the normal profit is ₹ 15,000, super profit is __________.
₹ 25,000
₹ 5,000
₹ 10,000
₹ 15,000
Book profit of 2017 is ₹ 35,000; non-recurring income included in the profit is ₹ 1,000 and abnormal loss charged in the year 2017 was ₹ 2,000, then the adjusted profit is ____________.
₹ 36,000
₹ 35,000
₹ 38,000
₹ 34,000
The total capitalised value of a business is ₹ 1,00,000; assets are ₹ 1,50,000 and liabilities are ₹ 80,000. The value of goodwill as per the capitalisation method will be ___________.
₹ 40,000
₹ 70,000
₹ 1,00,000
₹ 30,000
Samacheer Kalvi solutions for Accountancy [English] Class 12 TN Board 4 Goodwill in partnership accounts Very short answer questions [Pages 133 - 2]
What is goodwill?
What has acquired goodwill?
What is super profit?
What is a normal rate of return?
State any two circumstances under which the goodwill of a partnership firm is valued.
Samacheer Kalvi solutions for Accountancy [English] Class 12 TN Board 4 Goodwill in partnership accounts Short answer questions [Page 133]
State any six factors determining goodwill.
How is goodwill calculated under the super profits method?
How is the value of goodwill calculated under the capitalisation method?
Compute average profit from the following information.
2016: ₹ 8,000; 2017: ₹ 10,000; 2018: ₹ 9,000
Calculate the value of goodwill at 2 years purchase of average profit when average profit is ₹ 15,000.
Samacheer Kalvi solutions for Accountancy [English] Class 12 TN Board 4 Goodwill in partnership accounts Exercises [Pages 133 - 132]
Simple average profit method
The following are the profits of a firm in the last five years:
2014: ₹ 10,000; 2015: ₹ 11,000; 2016: ₹ 12,000; 2017: ₹ 13,000 and 2018: ₹ 14,000
Calculate the value of goodwill at 2 years purchase of average profit of five years.
From the following information, calculate the value of goodwill on the basis of 3 years purchase of average profits of last four years.
| Year | Result | Amount (₹) |
| 2015 | Profit | 5,000 |
| 2016 | Profit | 8,000 |
| 2017 | Loss | 3,000 |
| 2018 | Profit | 6,000 |
From the following information relating to a partnership firm, find out the value of its goodwill based on 3 years purchase of average profits of the last 4 years:
- Profits of the years 2015, 2016, 2017 and 2018 are ₹ 10,000, ₹ 12,500, ₹ 12,000 and ₹ 11,500 respectively.
- The business was looked after by a partner and his fair remuneration amounts to ₹ 1,500 per year. This amount was not considered in the calculation of the above profits.
From the following information relating to Sridevi enterprises, calculate the value of goodwill on the basis of 4 years purchase of the average profits of 3 years.
- Profits for the years ending 31st December 2016, 2017 and 2018 were ₹ 1,75,000, ₹ 1,50,000 and ₹ 2,00,000 respectively.
- A non-recurring income of ₹ 45,000 is included in the profits of the year 2016.
- The closing stock of the year 2017 was overvalued by ₹ 30,000.
The following particulars are available in respect of the business carried on by a partnership firm:
- Profits earned: 2016: ₹ 25,000; 2017: ₹ 23,000 and 2018: ₹ 26,000.
- Profit of 2016 includes a non-recurring income of ₹ 2,500.
- Profit of 2017 is reduced by ₹ 3,500 due to stock destroyed by fire.
- The stock was not insured. But, it is decided to insure the stock in the future. The insurance premium is estimated to be ₹ 250 per annum.
You are required to calculate the value of goodwill of the firm on the basis of 2 years purchase of average profits of the last three years.
Weighted average profit method
Find out the value of goodwill at three years purchase of weighted average profit of last four years.
| Year | Profit ₹ |
Weight |
| 2015 | 10,000 | 1 |
| 2016 | 12,000 | 2 |
| 2017 | 16,000 | 3 |
| 2018 | 18,000 | 4 |
Purchase of super profit method
From the following details, calculate the value of goodwill at 2 years purchase of super profit:
- Total assets of a firm are ₹ 5,00,000
- The liabilities of the firm are ₹ 2,00,000
- Normal rate of return in this class of business is 12.5%.
- Average profit of the firm is ₹ 60,000.
A partnership firm earned net profits during the last three years as follows:
2016: ₹ 20,000; 2017: ₹ 17,000 and 2018: ₹ 23,000
The capital investment of the firm throughout the above mentioned period has been ₹ 80,000. Having regard to the risk involved, 15% is considered to be a fair return on capital employed in the business. Calculate the value of goodwill on the basis of 2 years purchase of super profit.
Annuity method
From the following information, calculate the value of goodwill under the annuity method:
| Particulars | ₹ |
| Average profit | 14,000 |
| Normal Profit | 4,000 |
| Normal rate of return | 15% |
| Years of purchase of goodwill | 5 |
Present value of ₹ 1 for 5 years at 15% per annum as per the annuity table is 3.352
Capitalisation of super profit method
Find out the value of goodwill by capitalising super profits:
- Normal Rate of Return 10%
- Profits for the last four years are ₹ 30,000, ₹ 40,000, ₹ 50,000 and ₹ 45,000.
- A non-recurring income of ₹ 3,000 is included in the above mentioned profit of ₹ 30,000.
- Average capital employed is ₹ 3,00,000.
Capitalisation method
From the following information, find out the value of goodwill by capitalisation method:
- Average profit ₹ 20,000
- Normal rate of return 10%
- Tangible assets of the firm ₹ 2,20,000
- Liabilities of the firm ₹ 70,000.
Solutions for 4: Goodwill in partnership accounts
Samacheer Kalvi solutions for Accountancy [English] Class 12 TN Board chapter 4 - Goodwill in partnership accounts
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Concepts covered in Accountancy [English] Class 12 TN Board chapter 4 Goodwill in partnership accounts are Goodwill in Partnership Accounts, Nature of Goodwill, Factors Determining the Value of Goodwill of a Partnership Firm, Need for Valuation of Goodwill of Partnership Firms, Classification of Goodwill, Methods of Valuation of Goodwill.
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