How to calculate capital employed in valuation of goodwill and
how to calculate average capital employed and diffrence between
closing capital employed and total capital employed?
Puneet Ostwal (Student) (25 Points)
02 June 2010How to calculate capital employed in valuation of goodwill and
how to calculate average capital employed and diffrence between
closing capital employed and total capital employed?
llllVICTORllll
(Internal Auditor)
(511 Points)
Replied 03 June 2010
Capital Employed is the amount available for the party(partner, sole proprietor whoever) to the business at any point of time... therefore, capital employed and evarage capital employed should give same meaning. therefore, capital employed for the valuation of goodwill will, be (opening capital+closing capital/2), eventhough am not happy with that calculation coz of below said illustration
Say a partner has opening capital balance of 10, 000 Rs, and he brought in capital of 90,000 during july and withdrew it on feb of the month so, his captal balance will close at 10,000, and avarage capital will remain at 10,000 eventhough his actual capital employe for the year is 1,00,000 Rs...
so, it will be better to take weighted avarage calculation of avarage capital.
A
m i Right? anyone please confirm
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