There are two statements:
Statement I:
The balance in the Statement of Profit and Loss in the Balance Sheet of Samta Ltd. showed a deficit of \rupee2,00,000 on 31.03.2023 and a surplus of \rupee3,00,000 on 31.03.2024. \rupee5,00,000 will be considered as profit earned during the year for preparing Cash Flow Statement.
Statement II:
On 31.03.2023 the goodwill account of Zeeta Ltd. showed a balance of \rupee4,00,000 and on 31.03.2024 it showed a balance of \rupee5,00,000. \rupee1,00,000 will be considered as goodwill acquired during the year for the preparation of Cash Flow Statement.
Choose the correct option from the following:
Statement I: The balance in the Statement of Profit and Loss in the Balance Sheet of Samta Ltd. showed a deficit of \rupee2,00,000 on 31.03.2023 and a surplus of \rupee3,00,000 on 31.03.2024. \rupee5,00,000 will be considered as profit earned during the year for preparing Cash Flow Statement.
Statement II: On 31.03.2023 the goodwill account of Zeeta Ltd. showed a balance of \rupee4,00,000 and on 31.03.2024 it showed a balance of \rupee5,00,000. \rupee1,00,000 will be considered as goodwill acquired during the year for the preparation of Cash Flow Statement.
Choose the correct option from the following:
Show Hint
- Both the Statements are true.
- Both the Statements are false.
- Statement I is true, Statement II is false.
- Statement II is true, Statement I is false.
The Correct Option is C
Solution and Explanation
The balance in Statement of Profit & Loss increased from (–2,00,000) to +3,00,000. This change of \rupee5,00,000 represents net profit for the year and is used as the starting point in the indirect method of Cash Flow Statement.
Statement II: FALSE
Goodwill is an intangible asset. An increase in goodwill in the balance sheet is not automatically considered “goodwill acquired” in cash unless it's purchased. It could also arise due to internal adjustments (e.g., merger revaluation, issue of shares, etc.).
Therefore, it is not correct to treat this \rupee1,00,000 increase as goodwill purchased without further clarification.
Top Questions on Goodwill Valuation
Asha, Ashish and Naman were partners in a firm sharing profits and losses in the ratio of 2 : 5 : 3. The firm closes its books on 31st March every year. On 31st December, 2024 Ashish died. On the date of his death, there was a balance of ₹3,00,000 in his capital account and ₹2,00,000 in General Reserve.
The partnership deed provided that on the death of a partner, his representatives will be entitled to the following:
(i) Balance in the capital account and interest on the same @ 10% p.a.
(ii) His share in the goodwill of the firm. The goodwill of the firm on Ashish’s death was valued at ₹6,00,000.
(iii) His share in the profits of the firm to be calculated on the basis of previous year’s profit. The profit of the firm for the year ended 31st March, 2024 was ₹3,60,000.
Prepare Ashish’s Capital Account to be presented to his executors.- CBSE CLASS XII - 2025
- Accountancy
- Goodwill Valuation
Mita and Vihaan were partners in a firm sharing profits and losses in the ratio of 3:2.
On 31st March, 2024 their Balance Sheet was as follows:
Balance Sheet of Mita and Vihaan as at 31st March, 2024
Liabilities Amount (₹) Assets Amount (₹) Sundry Creditors 2,00,000 Cash 50,000 Capitals: Sundry Debtors 2,00,000 Mita 4,00,000 Less: Provision for Doubtful Debts (7,000) Vihaan 3,00,000 1,93,000 Stock 2,50,000 Plant and Machinery 3,50,000 Patents 57,000 Total 9,00,000 Total 9,00,000 On the above date, Zen was admitted as a new partner for 4/15 share in the profits on the following terms:
- Zen will bring ₹3,00,000 as his capital and his share of goodwill premium in cash. On Zen’s admission, goodwill of the firm was valued at ₹4,12,500.
- The provision for bad debts will be maintained at 5% of the debtors.
- Stock will be valued at ₹2,00,000, plant and machinery at ₹4,00,000 and patents at ₹1,20,000.
- There was a bill of ₹30,000 for goods purchased which was omitted from the books.
Pass necessary journal entries for the above transactions in the books of the firm on Zen’s admission
- CBSE CLASS XII - 2025
- Accountancy
- Goodwill Valuation
- Jeevan and Kavi were partners in a firm with capitals of ₹12,00,000 and ₹15,00,000 respectively. Annual salary of the partners was ₹2,00,000 each. The market rate of interest was 10%. During the previous three years the profits were ₹8,00,000, ₹9,00,000 and ₹7,00,000. The goodwill of the firm is to be valued at 2 years’ purchase of the last 3 years’ average super profits.
Calculate the goodwill of the firm.- CBSE CLASS XII - 2025
- Accountancy
- Goodwill Valuation
- Giri and Shyam were partners in a firm sharing profits and losses in the ratio of 3 : 2. Their capitals were ₹1,60,000 and ₹1,00,000 respectively. Hema was admitted for $\dfrac{1}{5}$ share in the profits of the firm. Hema brought ₹1,50,000 as her capital. The goodwill of the firm on Hema’s admission was:
- CBSE CLASS XII - 2025
- Accountancy
- Goodwill Valuation
- Uma and Veena were partners in a firm sharing profits and losses in the ratio of 4 : 5. On 1st April, 2024 they decided to admit Usha as a new partner for $\dfrac{1}{4}$ share in the profits of the firm. On Usha’s admission it was decided that the goodwill of the firm will be valued equal to the previous year’s profit. The profit for the year ended 31st March, 2024 was ₹5,76,000. However, to arrive at this profit, both the opening stock and closing stock were overvalued by ₹50,000. The goodwill of the firm will be:
- CBSE CLASS XII - 2025
- Accountancy
- Goodwill Valuation
Questions Asked in CBSE CLASS XII exam
- The monetary policy is formulated by the ____ in the Indian economy.
- CBSE CLASS XII - 2025
- Money and Banking
- "The government generally levies higher Goods and Services Tax (GST) on socially undesirable products like cigarettes, tobacco, liquor etc." Identify and explain the indicated government budget objective in the above statement.
- CBSE CLASS XII - 2025
- Government Budgeting
- Find the values of \( a \) for which \( f(x) = \sin x - ax + b \) is increasing on \( \mathbb{R} \).
Two batteries of emf's \(3V \& 6V\) and internal resistances 0.2 Ω \(\&\) 0.4 Ω are connected in parallel. This combination is connected to a 4 Ω resistor. Find:
(i) the equivalent emf of the combination
(ii) the equivalent internal resistance of the combination
(iii) the current drawn from the combination- CBSE CLASS XII - 2025
- Electrical Circuits
Four students of class XII are given a problem to solve independently. Their respective chances of solving the problem are: \[ \frac{1}{2},\quad \frac{1}{3},\quad \frac{2}{3},\quad \frac{1}{5} \] Find the probability that at most one of them will solve the problem.