A partnership firm has a total capital of ₹70 crores and expects a normal rate of profit of 11%. During the current year the firm earned a profit of ₹8.5 crores. Using the super‑profit method with a capitalization rate of 17%, calculate the goodwill of the firm.

Step-by-step solution

1. Compute normal profit: 0.11 × 70 = 7.70 crores.
2. Compute super profit: 8.50 – 7.70 = 0.80 crores.
3. Set capitalization rate: 17% = 0.17.
4. Calculate goodwill: 0.80 ÷ 0.17 ≈ 4.7059 crores.
5. Round to ₹4.71 crores.

Concept tested: Partnership goodwill (super‑profit method)

Published 10 October 2026 · How this solution was prepared and checked