Which account will be credited for the balance ₹50,000 if debentures of ₹5,50,000 are issued for the consideration of net assets of ₹6,00,000?

Capital Reserve A/c

The correct answer is option 2- Capital Reserve A/c.

Net assets = Purchase consideration + Capital reserve
6,00,000 = 5,50,000 + 50,000

In case of the whole business being taken over if the amount of debentures issued is more than the amount of the net assets taken over, the difference (excess) will be treated as value of goodwill and the same shall also be debited while passing the journal entry for the purchase of vendor’s business. But if it is the other way round, i.e., the value of debentures is less than the value of the net assets taken over the difference will be credited to capital Reserve account.