Excess value of net assets over purchase consideration at the time of purchase of business is credited to Option 1: General reserve Option 2: Capital reserve Option 3: Vendors' account Option 4: Debenture redemption reserve

Answer: Capital reserve. Solution: When a business is purchased, the purchase consideration (amount paid) is compared with the net assets acquired (Total Assets - Liabilities taken over). If Net Assets > Purchase Consideration, the excess represents a gain to the purchasing firm. This gain arises from a capital transaction (not from regular business operations) and is therefore credited to Capital Reserve. Capital Reserve is created from capital profits which are: - Non-recurring in nature - Not available for distribution as dividends - Arising from capital transactions like purchase of business, sale of fixed assets, profit prior to incorporation, etc. The journal entry for this transaction would be: Excess = Net Assets - Purchase Consideration Various Assets A/c ... Dr. To Various Liabilities A/c To Vendor's A/c (Purchase Consideration) To Capital Reserve A/c (Excess) The other options are incorrect because: - General Reserve is created from revenue profits and can be distributed as dividends - Vendor's Account represents the liability to the seller of the business - Debenture Redemption Reserve is specifically created for redeeming debentures as per Companies Act

Partnership

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

General reserve

Capital reserve

Vendors' account

Debenture redemption reserve

✅ Correct Option: 2

When a business is purchased, the purchase consideration (amount paid) is compared with the net assets acquired (Total Assets - Liabilities taken over).

If Net Assets > Purchase Consideration, the excess represents a gain to the purchasing firm.

This gain arises from a capital transaction (not from regular business operations) and is therefore credited to Capital Reserve.

Capital Reserve is created from capital profits which are:

Non-recurring in nature
Not available for distribution as dividends
Arising from capital transactions like purchase of business, sale of fixed assets, profit prior to incorporation, etc.

The journal entry for this transaction would be:

$\text{Excess = Net Assets - Purchase Consideration}$

Various Assets A/c ... Dr.

$\quad$ To Various Liabilities A/c

$\quad$ To Vendor's A/c (Purchase Consideration)

$\quad$ To Capital Reserve A/c (Excess)

The other options are incorrect because:

General Reserve is created from revenue profits and can be distributed as dividends
Vendor's Account represents the liability to the seller of the business
Debenture Redemption Reserve is specifically created for redeeming debentures as per Companies Act

2025: 22 May Shift 1

The ratio in which the old partners agree to give their share of profit in favor of the incoming partner is called:

2026: 21 May Shift 1

Arrange the sequence of following important adjustments which require attention at the time of admission of a new partner.

(A) Valuation and adjustment of goodwill

(B) Balance sheet of Reconstituted firm

(D) New profit sharing ratio and Sacrificing ratio

Choose the correct answer from the options given below:

2024

Kavita and Lalita are partners, sharing profits in the ratio of 2:1. They decide to admit Mohan for 1/4th share in profits with a guaranteed amount of ₹ 25,000. Both Kavita and Lalita undertake to meet the liability arising due to the guaranteed amount to Mohan in their respective profit sharing ratio. The firm earned profits of ₹ 76,000 for the year 2022-23. The deficiency borne by Kavita is:

2026: 12 May Shift 1

Match List-I with List-II

List-I	List-II
(A) Goodwill	(I) Amount brought by new partner to compensate old partners
(B) Sacrificing ratio	(II) Advantage of reputation, enabling firm to earn super profits
(C) New profit sharing ratio	(III) Ratio in which old partner give up their share
(D) Premium for Goodwill	(IV) Ratio after reconstitution of partnership

Choose the correct answer from the options given below:

2026: 12 May Shift 1

In case of admission of a partner, Match List-I with List-II.

List-I	List-II
(A) For Unrecorded Liability	(I) Revaluation A/c Dr. To Asset A/c
(B) For Over-Valuation of Asset	(II) Partners' Capital A/c Dr. To Revaluation A/c
(C) For transferring loss on revaluation	(III) Revaluation A/c Dr. To Liability A/c
(D) For Under-Valuation of Asset	(IV) Asset A/c Dr. To Revaluation A/c

Choose the correct answer from the options given below:

2025: 26 May Shift 2

Das and Sinha are partners in a firm sharing profits in 4:1 ratio. They admitted Pal as a new partner for 1/4th share in the profits, which he acquired wholly from Das. The new profit sharing ratio of the partners is-

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

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