How is an expense not expected in future treated in goodwill valuation?

Correct answer: It is added back to profit

Goodwill valuation should be based on the maintainable profit that the business is expected to earn in the future. If an expense recorded in a past year will not recur, it has reduced the reported past profit but will not reduce future earning capacity. Therefore, while adjusting that past profit, the non-recurring expense is added back. For example, if reported profit is ₹80,000 after a one-time expense of ₹10,000, adjusted profit becomes ₹90,000. Hence option A is correct. Option B would understate maintainable profit, option C incorrectly changes capital, and option D describes a banking action rather than a profit adjustment.