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Goodwill realeted

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(Querist)
02 May 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 should NOT add back interest on capital if the profit given is already after interest on capital.
Doing so will double count the interest, leading to an overstatement of goodwill.

✔️ Conclusion:
The correct goodwill calculation = ₹12L × 3 = ₹36L
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