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Subjects

Accountancy

Goodwill

Goodwill, or साख, is the intangible value a partnership firm earns through its reputation, customer loyalty, business connections, location and ability to generate profits above the normal return. In Class 12 Accountancy, students learn why goodwill is valued when partners are admitted, retire, or change their profit-sharing ratio. The topic introduces the basic ideas behind average profit, super profit and capitalisation methods, along with the need to adjust partners’ capital accounts fairly.

Expert · Level 6 · 11 questions

Practice questions

01New partner brings capital (₹200000) equal to his (1/5) share. Adjusted capital of old partners is (₹840000). What is the conclusion about hidden goodwill?

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02Goodwill is (₹810000). New partner takes (1/9) share and sacrificing ratio is (4:5). How much will the first old partner be credited?

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03A, B and C share profits in the ratio 3:4:3. After B retires, A and C will share profits in the ratio 2:3. What will be the gaining ratio of A and C?

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04Retiring partner's goodwill share is (₹200000). Continuing partners' gaining ratio is (1:3). How much will the first continuing partner be debited?

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05Goodwill is (₹420000). A and B's old ratio is (5:2) and new ratio is (4:3). Who will be credited and by how much?

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06On admission of a new partner one old partner is also gaining. In internal adjustment of goodwill on which side will that gaining old partner appear?

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07The current profit of ₹4,50,000 includes an abnormal profit of ₹70,000. In the future, an expense saving of ₹30,000 will arise, while a new cost will increase expenses by ₹10,000. What will be the adjusted future profit?

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08The average profit is ₹3,90,000, the normal rate of return is 13%, and the actual capital is ₹27,00,000. What is the value of goodwill under the capitalization of average profit method?

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09Which statement is most accurate while making internal adjustment of goodwill?

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10A and B share profits in (5:4). C is admitted and new ratio is (4:3:2). Goodwill is (₹360000). How much will B be credited?

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11Profits are (₹360000), (₹420000), (₹540000). Future expense will increase by (₹30000). Normal profit is (₹350000). What will be super profit?

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