On 1st April, $\displaystyle 2023$, the books of the firm of Kashish and Sagar showed assets of ₹ $\displaystyle 9,00,000$ including cash of ₹ $\displaystyle 32,000$ and bank balance of ₹ $\displaystyle 1,68,000$ . The partners' capital accounts showed a balance of ₹ $\displaystyle 6,00,000$ and reserves constituted the rest. If the normal rate of return is $\displaystyle 8$% and the goodwill of the firm is valued at ₹ $\displaystyle 4,00,000$ at $\displaystyle 5$ years purchase of super profits, find the average profits of the firm.

Goodwill = No. of years’ purchase X Super Profits ₹$\displaystyle 4,00,000$ = $\displaystyle 5$ X Super Profits Super Profits = ₹$\displaystyle 80,000$ $\displaystyle 1$ Capital Employed= Total Assets- Outside Liabilities = ₹$\displaystyle 9,00,000$- Nil= ₹$\displaystyle 9,00,000$ Normal Profit =$\displaystyle 8$% of ₹$\displaystyle 9,00,000$ = ₹$\displaystyle 72,000$ $\displaystyle 1$ Super Profit= Average Profit - Normal Profit ₹$\displaystyle 80,000$ = Average profit - ₹$\displaystyle 72,000$ Average Profit = ₹$\displaystyle 1,52,000$ $\displaystyle 1$