Sunny and Rohan were partners in a firm sharing profits and losses in the ratio of $\displaystyle 2$ : 1. Their books showed that the capital employed on 31st March, $\displaystyle 2023$ was ₹ $\displaystyle 7,00$,000. The average profits earned by the firm were ₹ $\displaystyle 90$,000. Calculate the value of goodwill on the basis of $\displaystyle 5$ years purchase of super profits assuming that the normal rate of return is $\displaystyle 10$%.

Average Profits = ₹$\displaystyle 90,000$ Normal Profits= Normal rate of return x Capital Employed $\displaystyle 100$ = $\displaystyle 10$/$\displaystyle 100$ x ₹$\displaystyle 7,00,000$ = ₹$\displaystyle 70,000$…………………………………………………$\displaystyle 1$ Super Profits = Average Profits – Normal Profits = ₹$\displaystyle 90,000$ - ₹$\displaystyle 70,000$ = ₹$\displaystyle 20,000$………………………………………………….1 Goodwill = Super Profits x Number of years purchase Goodwill = ₹$\displaystyle 20,000$ x $\displaystyle 5$ = ₹$\displaystyle 1,00,000$………………………………………………….. $\displaystyle 1$