# Give the formula for calculation of Goodwill by ‘Capitalisation of Average Profit.’

Give the formula for calculation of Goodwill by ‘Capitalisation of Average Profit.’

Anurag Pathak Changed status to publish April 19, 2023

The following are the step

**Step 1: **

Calculate the average normal profit.

**Step 2: **

Calculate Capitalised value of the firm by using the formula given below:

Capitalised Value of the Business = Average Profit × 100/Normal Rate of Return (Profit)

**Step 3: **

Determine the value of Net Assets, on the date of Valuation of Goodwill.

Net Assets = All Assets (other than goodwill, non-trade investments, and fictitious assets) at their current values minus outside liabilities.

**Step 4: **

Goodwill = Capitalised Value of the Business (as per **Step 2**) – Net Assets (as per **Step 3**)

Anurag Pathak Changed status to publish April 20, 2023