Valuation Of Goodwill

Valuation Of Goodwill:

#) Need For Valuing Goodwill: Whenever the mutual rights of the partners changes then party which makes a sacrifice must be compensated. This basis of compensation is goodwill so we need to calculate goodwill. Mutual rights change under following circumstances

 

+> When profit sharing ratio changes

+> On admission of a partner

+> On Retirement or death of a partner

+> When amalganation of two firms taken place.

+> When partnership firm is sold.

#) Methods Of Valuation Of Goodwill:

+> Average profit method

+> Super profit method

+> Capitalization method

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