If vendors are issued fully paid shares of 1 25 000 in consideration of net assets of 1 50 000 the b...........

General Accounting Principles Accounting for Shares

If vendors are issued fully paid shares of ?1,25,000 in consideration of net assets of ?1,50,000, the balance of ?25,000 will be credited to :

Statement of Profit & Loss

Goodwill Account

Security Premium Reserve Account

Capital Reserve Account

Security Premium Reserve Account:

Purchase consideration can be paid off either by cash or issue of shares.

If the purchase consideration is more than the net assets worth, the difference amount will be considered as payment of goodwill.

If the purchase consideration is lower than the net assets worth, the difference amount will be considered as capital reserves.

If shares are issued at premium to vendor then the amount is debited to securities premium reserve account

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