A partnership firm has a total capital of ₹60 crores and a normal rate of profit of 9%. During the year the firm earned a profit of ₹8 crores. Using the super‑profit method with a capitalization rate of 18%, calculate the goodwill of the firm.

Step-by-step solution

1. Normal profit = Total capital × Normal rate = ₹60 crores × 9% = ₹5.4 crores.
2. Super profit = Actual profit – Normal profit = ₹8 crores – ₹5.4 crores = ₹2.6 crores.
3. Capitalization rate as decimal = 18% = 0.18.
4. Goodwill = Super profit ÷ Capitalization rate = ₹2.6 crores ÷ 0.18 ≈ ₹14.44 crores.

Concept tested: Super‑profit method of goodwill valuation

Published 1 October 2026 · How this solution was prepared and checked