Generally ,to calculate the average capital employed we deduct 1/2 of PAT from closing capital employed to arrive at Avg Capital Employed but in various questions I found out that only closing capital employed had been taken to arrive at normal profit in the calculation of goodwill inspite of the fact that PAT has been given in the question and still no adjustment has been done in regard to that.
can someone please clarify in which situation we do such adjustment??
Please clear this doubt
4 Replies
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 17 March 2019
when only a single year information is given for the BS then in that case only half of the profit is taken to arrive at avg CE but where comparative Bs's are given then in that case closing capital is used
Radhika
(na)
(25 Points)
Replied 18 March 2019
I am studying from institute's study material and practice manual only and in similar situations in few sums they have straight away taken closing capital employed and I some they the deducted rectified PAT that is why I am so confused
CA.Pankaj Rawat
(Chartered Accountant)
(1381 Points)
Replied 18 March 2019
ignore that sums nd follow ur concept.
Noor arora
(student)
(126 Points)
Replied 19 March 2019
yup i noe various treatments are done for same typ of questions..so better give assumption in ur workings or give alternate solution to be on safer side
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