COST ACCOUNTING
FINANCIAL TERMINOLOGY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Average annual profit /Initial cost of the investment x 100
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Initial cost of the investment /Average annual profit x 100
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Total profit /Initial cost of the investment x 100
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Initial cost of the investment /Total profit x 100
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Detailed explanation-1: -In this method, the value of goodwill is calculated by multiplying the average estimated profit or average future profit with the number of years of purchase. Simple average: In the simple average method, the goodwill is calculated by multiplying the average profit with the agreed number of years of purchase.
Detailed explanation-2: -Formula: Goodwill= [Super Profit*100/Normal rate of return]
Detailed explanation-3: -Capitalisation of Average Profit Method: In the method of capitalisation of average profit, the goodwill value is determined by subtracting the actual capital employed from the capitalised value of the average profits on the basis of normal rate of return.
Detailed explanation-4: -Weighted Average Profit = Total weighted Profit / Total weights.