Norah and Mallika were partners in a firm with a combined capital of ₹ 2,00,000. The normal rate of return was 10%. The profits of the last four…

Calculation of Normal Adjusted Profit Year Profit (₹) Adjustment (₹) Adjusted Profit (₹) $\displaystyle 2019$-$\displaystyle 20$ $\displaystyle 20,000$ - $\displaystyle 20,000$ $\displaystyle 2020$-$\displaystyle 21$ $\displaystyle 30,000$ - $\displaystyle 30,000$ $\displaystyle 2021$-$\displaystyle 22$ $\displaystyle 27,000$ - $\displaystyle 27,000$ $\displaystyle 2022$-$\displaystyle 23$ $\displaystyle 35,000$ $\displaystyle 4,000$ $\displaystyle 39,000$ TOTAL $\displaystyle 1,16,000$ Average Profit= (Total Adjusted Profit)/ No. of years = $\displaystyle 1,16,000$/$\displaystyle 4$ = ₹$\displaystyle 29,000$ Normal Profit= Capital Employed x Normal Rate of Return $\displaystyle 100$ = $\displaystyle 2,00,000$ x $\displaystyle 10$ = ₹$\displaystyle 20,000$ $\displaystyle 100$ Super Profit = Average Profit – Normal Profit = $\displaystyle 29,000$ - $\displaystyle 20,000$ = ₹$\displaystyle 9,000$ Goodwill= Super Profit x No. of years’ purchase = $\displaystyle 9,000$ x $\displaystyle 2$ = ₹$\displaystyle 18,000$