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Goodwill calculate

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(Querist)
04 June 2025 Understanding of goodwill, I want to ask if partnership firm readjust share ratio.
Suppose firm average Net profit 12 lakh after partner's interest on capital ( 10 lakh).
So, question is that in goodwill calculation
Average Profit X year purchase ( 3 years)
ie 12 lakh x 3 year = 36 Lakh
Or
(Average profit + partners interest on capital) X year purchase
ie ( 12 lakh + 10 lakh) X 3 year = 66 lakh
Which method is correct.
Please solve the query.
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Aashok Kumar Sharma online

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Aashok Kumar Sharma online (Expert)
12 August 2025 You add back partner’s interest on capital to average profit because goodwill is based on profits before charging interest on capital.

Hence, Goodwill = (12 lakh + 10 lakh) × 3 = ₹66 lakh is the correct method.
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