If Vendors are issued debentures of Rs 4 40 000 in consideration of assets of Rs 5 00 000 and liabil...........

General Accounting Principles Accounting For Debentures

If Vendors are issued debentures of Rs 4,40,000 in consideration of assets of Rs 5,00,000 and liabilities of Rs 1,00,000, the balance of Rs 40,000 will be debited to:

General Reserve Account

Capital Reserve Account

Goodwill Account

Statement of Profit & Loss

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Explanation:

Sometimes, the purchase consideration paid to the vendor may be more than the value of net assets (i.e. Asset purchased — Liabilities assumed) acquired or may be less than the value of net assets acquired.

if more then, Goodwill = Purchase consideration—Asset acquired — Liabilities taken over

if less then,Capital Reserve = Assets acquired—Liabilities taken over — Purchase Consideration

Purchase Consideration Rs.4,40,000

Net Assets worth Rs.4,00,000 (5,00,000-1,00,000)

Balance to be paid against goodwill Rs.40,000