The factors affecting the value of goodwill of the firm are
(i) Nature of business
(ii) Efficiently of management
The values which the firm is trying to propagate are
(i) Promoting education among the students of below poverty line.
(ii) Providing quality services to customers resulting in customer satisfaction

The factors affecting the goodwill of the firm are
(i) Location
(ii) Market situation
The values which the firm is trying to propagate are
(i) Sensitivity towards people belonging to lower income group.
(ii) Working towards customer satisfaction

(i) Under this method, goodwill is calculated by multiplying the weighted average profit by a certain number of years of purchase.
(ii) Goodwill = Weighted average profit x Number of years of purchase
(iii) In this method, weights are assigned to each year's profit. Weighted profit is ascertained by multiplying the weights assigned with the respective year's profit.
(iv) The sum of the weighted profits is divided by the sum of weights assigned to determine the weighted average profit
Weighted average profit
\(=\frac{Total\ of\ weighted\ profits}{Total\ of\ weights}\)

Goodwill may be classified into acquired goodwill or self-generated goodwill.
(i) Acquired or purchased goodwill:
(1) Goodwill acquired by making payment in cash or kind is called acquired or purchased goodwill.
(2) The excess of purchase consideration over the value of net assets acquired is treated as acquired goodwill.
(ii) Self - generated goodwill:
It is the goodwill which is self generated by a firm based on features of the business such as favourable location, local customers, etc. Such self-generated goodwill cannot be recorded in the books of accounts.

Following are the circumstances that require valuation of goodwill of partnership firms in order to protects the rights of the partners
(i) When there is a change in the profit sharing ratio
(ii) When a new partner is admitted into a firm
(iii) When an existing partner retires from the firm or when a partner dies.
(iv) When a partnership firm is dissolved

The nature of goodwill can be described as follows:
(i) Goodwill is an intangible fixed asset. It cannot be seen or touched.
(ii) It has a definite value depending on the profitability of the business enterprise.
(iii) It cannot be separated from the business
(iv) It helps in earning more profit and attracts more customers
(v) It can be purchased or sold only when the business is purchased or sold in full or in part

(i) Under this method, goodwill is the excess of capitalised value of average profit of the business over the actual capital employed in the business.
Goodwill = Total capitalised value of the business - Actual capital employed
(ii) The total capitalised value of the business is calculated by capitalising the average profits on the basis of the normal rate of return.
Capitalised value of the business 
\(=\frac{Average\ profit}{Normal\ rate of\ return}\times 100\)
(iii) Actual capital employed = Fixed assets (excluding goodwill ) + Current assets - Current liabilities

Average profit \(=\frac{Total\ profit}{Number\ of\ years}\)
\(=\frac{10,000+12,000+12,000+11,500}{4}\)
\(=\frac{46,000}{4}\) = Rs.11,500

Goodwill Average profit \(\times\) Number of years of purchase
= 10,000 \(\times\) 3
= Rs. 30,000
Goodwill = Rs. 30,000

 Average profit = \(\frac { Total\ profit }{ Number\ of\ year } \)
Average profit = \(\frac { 27,000+31,000+32,000 }{ 3 } \)
= \(\frac { 90,000 }{ 3 } \) = Rs. 30,000

Goodwill = Average profit \(\times\) Number of years of purchase
= 24,400 \(\times\) 2
= Rs. 48,800

Tutorial note: Over valuation of closing stock in 2017 will result in over valuation of opening stock in 2018.
Average profit = \(\frac { Total\ profit }{ Number\ of\ year } \)
= \(\frac { 41,000+34,000+60,000 }{ 3 } \)
= \(\frac { 1,35,000 }{ 3 } \) = Rs. 42,000
Goodwill = Average profit \(\times\) Number of years of purchase
= 45,000 × 2
= Rs. 90,000