Question

If fully paid shares of ₹ 8,00,000 are issued for purchase of business with net assets of ₹ 6,00,000, then the balance of ₹ 2,00,000 will be ______.

Options

• Debited to Profit & Loss Account.

• Debited to Goodwill Account.

• Credited to Capital Reserve Account.

• Credited to Securities Premium Account.

Answer 1

If fully paid shares of ₹ 8,00,000 are issued for purchase of business with net assets of ₹ 6,00,000, then the balance of ₹ 2,00,000 will be debited to Goodwill Account.

Explanation:

Purchase Consideration = ₹ 8,00,000 and Net Assets = ₹ 6,00,000.

Since purchase consideration exceeds net assets by ₹ 2,00,000, the difference is treated as Goodwill and debited.