Akshay and Amit are partners in a firm and they admit Jaspal into partnership w.e.f. 1st April 2024. They agreed to value goodwill at 3 years’ purchase of super profit method for which they decided to average profit of last 5 years. The profits for the last 5 years were:
(i) Capitalisation of Average Profit Method.
(ii) Capitalisation of Super Profit Method.
| Year Ended | Net Profit (₹) |
|---|---|
| 31st March 2020 | 1,50,000 |
| 31st March 2021 | 1,80,000 |
| 31st March 2022 | 1,00,000 (including abnormal loss of ₹ 1,00,000) |
| 31st March 2023 | 2,60,000 (including abnormal gain (profit) of ₹ 40,000) |
| 31st March 2024 | 2,40,000 |
The firm has total assets of ₹ 20,00,000 and Outside Liabilities of ₹ 5,00,000 as on that date Normal Rate of Return in similar businesses is 10%.
