Confused, What is the difference between Average Profit and Super Profit in class 12 Accountancy CBSE, ISC, and State Board.
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Average Profit vs Super Profit (Difference and Comparison)
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|Basis||Average Profit||Super Profit|
|Meaning||It is the average of the normal profit of past agreed years.||It is the excess of average profit over normal profit.|
|Normal Rate of Return||The normal rate of return is not relevant in the calculation of average profit.||The normal rate of return is considered while calculating the super profit.|
|Average Capital Employed||Average capital employed is not considered while calculating average profit.||Average capital employed is taken into account while calculating the super profit.|
|Relevance of valuing Goodwill||Average profit is relevant for the average profit method, super profit method, and capitalization method of valuation of goodwill.||Super profit is relevant for the Super Profit Method and Capitalisation of the Super Profit Method of valuation of goodwill.|