Super Profit Method Video Lecture - Accounting for A Level

next is super profit method now every
business makes a profit the previous
method the average profit method does
not consider so suitable because every
business after all makes profits and
there is no need to compensate on
account of goodwill for normally making
profits but if a business makes
supernormal profit extra profits then
there is good so that is super profit
method where goodwill is what super
profit into the number of years of
purchase of good and what is super
profit super profit is the actual profit
which the business needs over the normal
profit in the same kind of business so
normally if I expect the normal rate of
return of 10% but my business generates
profits equal to 25% only then that
business should have good good business
should be said to have good so good will
endure this method is based on the extra
profits the supernormal profits that is
made so goodwill here just like in the
previous method it was average profit
into normal if users purchase here it is
super profit extra profit into the
number of years of purchase and what is
our super profit if the actual profit
that the business is making - the normal
profit that it should have been making
normally usually normal profit is
computed as what is the total capital
which has been employed by the business
into the normal range of Preta what is
perceived as a normal later that into
the capital employed the capital that
the partnership has sunk into the
business that is the amount of profit
they should be thinking but assuming
that the business is making much higher
profits the difference between the
actual profit made and the normal profit
the ratio of earn is super profit
and goodwill is super profit into number
of years purchase let us consider a
problem a foam has an average profit of
six less rate of return on capital
employed is 12.5 percent per annum total
capital employed in the firm was 40
lakhs goodwill on the basis of three
years purchase of super profit is its
average profit is actually 60 the rate
of return on capital employed is 12.5
percent and the total capital employed
in the firm is 40 lakh so what is let us
take goodwill is first and foremost
three years purchase into super profits
right now what is super profit super
profit is equal to the actual profit
which is mean - the normal profit what
is actual profit actual profit the
average profit which is being made is
six lakh - what is the normal profit it
is supposed to be 12.5 percent of the
capital employed 40 lakh normal rate of
return 12.5 percent normal rate of
return 12.5 percent of 14 max that is
equal to find life therefore we have 6
lakh -5 not super profit is equal to 1
lakh super profit is equal to what is
good with therefore goodwill is equal to
3 years into 1 lambda equal to 3 equal
to 3 months
normal profit five-lack super profit six
lakh - five lakh 1 lakh could be three
years purchase