Target Exam

CUET

Subject

-- Accountancy Part A

Chapter

Issue and Redemption of Debentures

Question:

Excess value of net assets over purchase consideration at the time of purchase of business is credited to

Options:

General reserve

Capital reserve

Vendors' account

Debenture redemption reserve

Correct Answer:

Capital reserve

Explanation:

The correct answer is Option (2) → Capital reserve

When net assets acquired exceed the purchase consideration, the surplus is a capital profit and is credited to Capital Reserve (if consideration exceeds net assets, the difference is Goodwill).