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Accountancy · 2026 · 3 marks
CBSE 2026 · Region 2 · Set 1 · Q20
Average profits of a firm during the last few years were ₹ 1,60,000. The normal rate of return in a similar business is 10%. If the goodwill of the…
Average profits of a firm during the last few years were ₹ $\displaystyle 1,60$,000. The normal rate of return in a similar business is $\displaystyle 10$%. If the goodwill of the firm is ₹ $\displaystyle 4,00,000$ at four years purchase of super profit, find the capital employed by the firm.
A business earned average profits of ₹ $\displaystyle 60,000$ during the last three years. The normal rate of return on similar business is $\displaystyle 12$%. The value of net assets of the business is ₹ $\displaystyle 4,00$,000. Calculate the value of goodwill by : (i) Capitalisation of average profits method. (ii) Capitalisation of super profits method.
Marking-scheme solution
(a)
Goodwill = Super profit x Number of years’ purchase
₹$\displaystyle 4,00,000$ = Super profit x $\displaystyle 4$
Super Profit = $\displaystyle 4,00,000$/$\displaystyle 4$ = ₹$\displaystyle 1,00,000$
Average profit= ₹$\displaystyle 1,60,000$
Super Profit = Average Profit – Normal Profit
Normal Profit= Average Profit – Super profit
Normal Profit = ₹ $\displaystyle 1,60,000$ – ₹ $\displaystyle 1,00,000$ = ₹ $\displaystyle 60,000$
Normal Profit = Normal Rate of Return x Capital Employed
$\displaystyle 100$
₹$\displaystyle 60,000$ =$\displaystyle 10$/$\displaystyle 100$ x Capital Employed
Capital Employed = $\displaystyle 100$/$\displaystyle 10$ x ₹$\displaystyle 60,000$
= ₹$\displaystyle 6,00,000$
Q.20 (b) A business earned….
Ans. (b)
(i)
Capitalization of average profits method:
Goodwill= Capitalised Value of the firm on the basis of average profits – Net Assets
Capitalised Value of the firm = Average Profits x $\displaystyle 100$
Normal rate of return
= ₹ $\displaystyle 60,000$ x $\displaystyle 100$
$\displaystyle 12$
= ₹ $\displaystyle 5,00,000$
Net Assets = ₹ $\displaystyle 4,00,000$
Goodwill = ₹ $\displaystyle 5,00,000$ - ₹ $\displaystyle 4,00,000$
= ₹ $\displaystyle 1,00,000$
(ii)
Capitalisation of super profits method :
Goodwill = Super Profits x $\displaystyle 100$/ Normal rate of return
Normal profit = Normal rate of Return x Capital Employed
$\displaystyle 100$
Normal Profit = $\displaystyle 12$/$\displaystyle 100$ x ₹ $\displaystyle 4,00,000$
= ₹$\displaystyle 48,000$
Average Profit = ₹$\displaystyle 60,000$
Super Profit = Average Profit - Normal Profit
Super Profit = ₹ $\displaystyle 60,000$ - ₹ $\displaystyle 48,000$
= ₹ $\displaystyle 12,000$
Goodwill = ₹ $\displaystyle 12,000$ x $\displaystyle 100$/$\displaystyle 12$
= ₹$\displaystyle 1,00,000$
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CBSE Class 12 Accountancy past-paper question from the 2026 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.