Question

If fully paid shares of ₹ 10,00,000 are issued for purchase of business having net assets of ₹ 12,00,000, the balance of ₹ 2,00,000 will be ______.

Options

• Credited to Goodwill Account.

• Debited to Vendor's Account.

• Credited to Capital Reserve Account.

• Debited to Asset Account.

Answer 1

If fully paid shares of ₹ 10,00,000 are issued for purchase of business having net assets of ₹ 12,00,000, the balance of ₹ 2,00,000 will be credited to Capital Reserve Account.

Explanation:

Net Assets = ₹ 12,00,000 and Purchase Consideration = ₹ 10,00,000.

Since net assets exceed purchase consideration by ₹ 2,00,000, the difference is credited to Capital Reserve Account.