Suppose if I'm selling my business to Mr. X and my average profit is ?1,00,000 of last five years. So, in this situation not only in this but in any, how many no. Of years of goodwill can be calculated. 1,2,3,4 or 5 or either all of them could be.
And these years are what? Like they're estimated from the mutual understanding between me and Mr. X that upto that year you will be getting profit?
Dear Student,
No of years purchased for goodwill has no any connection with the average of how many years. It means that for how many years the organisation will get the benefit of goodwill. Therefore, there is no any hard and fast rule to calculate No. of years purchased, but its just the mutual setting. Normally No. of years purchased are less than the years of average profit.
Regards.
No of years purchased for goodwill has no any connection with the average of how many years. It means that for how many years the organisation will get the benefit of goodwill. Therefore, there is no any hard and fast rule to calculate No. of years purchased, but its just the mutual setting. Normally No. of years purchased are less than the years of average profit.
Regards.