Question

Raju and Rinku were partners sharing profits and losses in the ratio 3:2. They admitted Sumit as a new partner for 1/3 share. On the date of admission Capitals of Raju and Rinku were ₹ 5,50,000 and ₹ 6,50,000 respectively, also, General Reserve of ₹ 3,00,000 and Profit and Loss (Dr.) balance of ₹ 1,00,000 were appearing in the books of accounts. Firm made an average profits of ₹ 2,40,000 during the last few years and the normal rate of earning was expected to be 12%. Calculate the Goodwill of the firm by Capitalisation Method.

Answer 1

Capitalised value of firm =2,40,000*100/12=20,00,000 

Capital employed =Capital of Raju+ Capital of Rinku + General reserve – P&L (Dr) 
                            = 5,50,000+ 6,50,000+3,00,000-1,00,000= 14,00,000 

Goodwill= Capitalised value – Capital employed= 20,00,000-14,00,000= Rs. 6,00,000