PPT : Treatment of goodwill in Partnership Accounts - 1 | Accountancy Class 12 - Commerce PDF Download

 Page 2


Learning objectives
What is Goodwill
Methods of Valuation of Goodwill
Understand when does the need for valuation 
of goodwill arise
Learn the accounting of goodwill
Page 3


Learning objectives
What is Goodwill
Methods of Valuation of Goodwill
Understand when does the need for valuation 
of goodwill arise
Learn the accounting of goodwill
What is Goodwill
Goodwill is the value
of reputation of a firm 
in respect of profits
expected in futureoverandabove
the normal rate of profits.
Page 4


Learning objectives
What is Goodwill
Methods of Valuation of Goodwill
Understand when does the need for valuation 
of goodwill arise
Learn the accounting of goodwill
What is Goodwill
Goodwill is the value
of reputation of a firm 
in respect of profits
expected in futureoverandabove
the normal rate of profits.
Reasons of Excess Profit
Excess profit earned by a firm may be due to its
Locational  
advantage
Better 
customer  
service
Possession of 
a unique 
patent right
Personal 
reputation of 
the partner
For similar 
other reasons
Page 5


Learning objectives
What is Goodwill
Methods of Valuation of Goodwill
Understand when does the need for valuation 
of goodwill arise
Learn the accounting of goodwill
What is Goodwill
Goodwill is the value
of reputation of a firm 
in respect of profits
expected in futureoverandabove
the normal rate of profits.
Reasons of Excess Profit
Excess profit earned by a firm may be due to its
Locational  
advantage
Better 
customer  
service
Possession of 
a unique 
patent right
Personal 
reputation of 
the partner
For similar 
other reasons
Methods of Valuation of  
Goodwill
Average profit basis
Super profit basis 
Annuity basis 
Capitalisation basis