Answers

2016-02-26T18:50:11+05:30
Average Profit means average of past years profits. It is calculated by dividing Total Profit of past years by Number of Years, i.e. . It is used for calculating goodwill under the Average Profit Method, Super Profit Method and Caplitalisation Method. On the other hand Super Profit is calculated by deducting Normal Profits from the Average Profits as shown by the formula given below:

Super Profit =  Average Profit – Normal Profit.

Note: It should be noted that there is no as such term Average Super Profit, it is only Average Profit that is used for the calculation of Goodwill

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