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M.114 An Aid to Accountancy—CBSE XII
(ii) Valuation of Goodwill by Capitalisation Method:
Goodwill = Total Capitalised Value of Business* – Actual Capital Employed
= ` 16,00,000 – ` 8,00,000 = ` 8,00,000.

Average Net Profit × 100
*Total Capitalised Value of Business =
Normal Rate of Return
)
(Average Profit – Partners’ Salary × 100
=
15
( 4,40,000 – 2,00,000 × 100` ` )
=
15
` 2,40,000 × 100
= = ` 16,00,000.
15
13.
INCOME AND EXPENDITURE ACCOUNT
Dr. for the year ended 31st March, 2018 Cr.
Expenditure ` Income `
To Salaries 1,98,000 By Subscription 3,96,000
Add: Outstanding Salaries 18,000 2,16,000 Add: Advance in the beginning 12,000 4,08,000
To Depreciation on Sports Equipment (WN 3) 30,000 By Interest on Investment 24,000
To Surplus, i.e., Excess of Income
over Expenditure 1,86,000
4,32,000 4,32,000

BALANCE SHEET as at 31st March, 2018
Liabilities ` Assets `

Salaries Outstanding 18,000 Cash at Bank 96,000
Capital Fund (WN 1) 5,82,000 Investment (WN 2) 3,00,000
Add: Surplus 1,86,000 7,68,000 Sports Equipment:
Opening Balance 1,80,000
Add: Purchase 2,40,000
4,20,000
Less: Depreciation (WN 3) 30,000 3,90,000
7,86,000 7,86,000

Working Notes:
1. Calculation of Capital Fund as on 1st April, 2017:

BALANCE SHEET as at 1st April, 2017
Liabilities ` Assets `
Subscription Received in Advance 12,000 Cash at Bank 1,14,000
Capital Fund (Balancing Figure) 5,82,000 Investment (WN 2) 3,00,000
Sports Equipment 1,80,000
5,94,000 5,94,000