CUET CUET Accountancy 2024 - The adjustment required for overvaluation of closing stock, while calculating adjusted profit for calculating goodwill is | PYQs + Solutions

CUET Accountancy 2024

Accountancy

Accounting for Partnership

Medium

The adjustment required for overvaluation of closing stock, while calculating adjusted profit for calculating goodwill is

(A), (B) and (D) only

(A) and (C) only

(A) and (D) only

(B), (C) and (D) only

Correct Option: 2

To calculate goodwill, we need to adjust profits based on stock values.

If closing stock is overvalued, it means profits are inflated.

So, we need to reduce this inflated profit from the current year's profit (A) and also consider how it affects next year's profit (C).

Option (D) is not relevant because we don't add to previous year's profit in this context.

Thus, the correct adjustments are (A) and (C) only.

Final answer: Option 2.