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The profits for the last three years are ₹30,000, ₹45,000 and ₹60,000, respectively. What is the average profit used for calculating goodwill?

Answer and explanation

Correct answer: ₹45,000

Average profit = Total profit ÷ Number of years = (₹30,000 + ₹45,000 + ₹60,000) ÷ 3 = ₹1,35,000 ÷ 3 = ₹45,000. Therefore, option A is correct. ₹1,35,000 is the total profit for the three years, not the average. Exam tip: Always divide the total profit by the number of years to find average profit.

Related tags

Partnership AccountsGoodwillAverage ProfitMean CalculationPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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