At the time of purchase of a business, if net assets are in excess of purchase consideration, the excess money will be ...... ?
At the time of purchase of a business, if net assets are in excess of purchase consideration, the excess money will be ...... ?
Solution
✅ Correct Option: 3
When net assets acquired exceed the purchase consideration, the buyer has gained a bargain. This is a capital profit and is credited to Capital Reserve A/c.
In the reverse case, where the consideration exceeds net assets, the difference is debited to Goodwill A/c.
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