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Average profit is ₹90,000 and normal profit is ₹70,000. What is the super profit?

Answer and explanation

Correct answer: ₹20,000

Super profit is the excess of the actual or average maintainable profit over the normal profit expected from the capital employed at the normal rate of return. The governing formula is: Super Profit = Average Profit − Normal Profit. Substituting the given values gives ₹90,000 − ₹70,000 = ₹20,000. This means the business earns ₹20,000 more than the return regarded as normal for similar investments. Option B is only the normal-profit figure, option C is the average-profit figure, and option D incorrectly adds the two amounts instead of finding the excess. Therefore, option A correctly states the super profit.

Related tags

GoodwillSuper ProfitNormal ProfitValuationPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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