# Annu, Baby and Chetan are Partners In a Firm Sharing Profits and Losses Equally :- Accountancy

Annu, Baby and Chetan are partners in a firm sharing profits and losses equally. They decide to take Deep into partnership from 1st April, 2019 for
Annu, Baby and Chetan are partners in a firm sharing profits and losses equally. They decide to take Deep into partnership from 1st April, 2019 for 1/5th share in the future profits. For this purpose, goodwill is to be valued at 100% of the average annual profits of the previous three or four years, whichever is higher. The annual profits for the purpose of goodwill for the past four years were:

 Year Ended Profit (₹) 31st March, 2019 2,88,000; 31st March, 2018 1,81,800; 31st March, 2017 1,87,200; 31st March, 2016 2,53,200.

Calculate the value of goodwill.​

Average Profits of Previous three years

= \frac{2,88,000+1,81,8000+1,87,200}{3}= Rs. 2,19,000

Average Profits of Previous four years

= \frac{2,88,000+1,81,800+1,87,200+2,53,200}{4}= Rs. 2,27,550

Since,
The average profits of previous four years is greater than the average profits of previous three years.

Hence, Goodwill = 100% of Average Profits of Previous four years = Rs. 2,27,550

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