Raman and Daman are Partners Sharing Profits in the Ratio of 60 : 40 and For the Last Four Years - Bzziii.com
Raman and Daman are partners sharing profits in the ratio of 60 : 40 and for the last four years they have been getting annual salaries of ₹ 50,000
Raman and Daman are partners sharing profits in the ratio of 60 : 40 and for the last four years they have been getting annual salaries of ₹ 50,000 and ₹ 40,000 respectively. The annual accounts have shown the following net profit before charging partners' salaries:
Year ended 31st March, 2017 − ₹ 1,40,000; 2018 − ₹ 1,01,000 and 2019 − ₹ 1,30,000.
On 1st April, 2019, Zeenu is admitted to the partnership for 1/4th share in profit (without any salary). Goodwill is to be valued at four years' purchase of weighted average profit of last three years (after partners' salaries); Profits to be weighted as 1 : 2 : 3, the greatest weight being given to the last year. Calculate the value of Goodwill.![]()
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Year ended 31st March, 2017 − ₹ 1,40,000; 2018 − ₹ 1,01,000 and 2019 − ₹ 1,30,000.
On 1st April, 2019, Zeenu is admitted to the partnership for 1/4th share in profit (without any salary). Goodwill is to be valued at four years' purchase of weighted average profit of last three years (after partners' salaries); Profits to be weighted as 1 : 2 : 3, the greatest weight being given to the last year. Calculate the value of Goodwill.
| Year | Profits before charging Salary | Profits after charging Salary | Weights | Weighted Profits |
| 31st March, 2017 | 1,40,000 | 1,40,000- 90,000= 50,000 | 1 | 50,000 |
| 31st March, 2018 | 1,01,000 | 1,01,000- 90,000= 11,000 | 2 | 22,000 |
| 31st March, 2019 | 1,30,000 | 1,30,000- 90,000= 40,000 | 3 | 1,20,000 |
| Total | 6 | 1,92,000 |
Weight Average Profits = `"Total of Weight Average Profits"/"Total Weight"`
= Rs. `\frac{1,92,000}{6}`
= Rs. 32,000
Goodwill = Weighted Average Profits `\times` No. of years of Purchase
= Rs. ( 32,000 x 4 ) = Rs. 1,28,000.
Chapter-3 Goodwill: Nature and Valuation-TS.Grewal
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