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If vendors are issued fully paid shares of Rs. 1,00,000 in consideration of net assets of Rs. 1,20,000, the balance of Rs. 20,000 will be credited to:
- a)Goodwill account
- b)Capital Reserve account
- c)Vendor’s account
- d)Profit and Loss account
Correct answer is option 'B'. Can you explain this answer?
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If vendors are issued fully paid shares of Rs. 1,00,000 in considerati...
's accountd)Profit and Loss account
b) Capital Reserve account.
The balance of Rs. 20,000 represents the excess of net assets over the consideration paid to the vendors. This excess amount is known as capital reserve and is credited to the Capital Reserve account. This reserve can be used for various purposes such as writing off preliminary expenses, issuing bonus shares, etc.
b) Capital Reserve account.
The balance of Rs. 20,000 represents the excess of net assets over the consideration paid to the vendors. This excess amount is known as capital reserve and is credited to the Capital Reserve account. This reserve can be used for various purposes such as writing off preliminary expenses, issuing bonus shares, etc.
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If vendors are issued fully paid shares of Rs. 1,00,000 in considerati...
The correct answer is Capital Reserve account.
Capital Reserve Account:
- Capital reserves are created from profits that are not intended for distribution as dividends to shareholders. They are created to strengthen the financial position of the company and to meet future contingencies or unforeseen situations.
- In this case, the company is receiving net assets of Rs. 1,20,000 in exchange for fully-paid shares of Rs. 1,00,000. This means that the company has gained Rs. 20,000 in value from the transaction.
- Since this gain is not a part of the company's normal operating activities, it cannot be credited to the Profit and Loss account. Similarly, it is not a payment made to the vendor, so it cannot be credited to the Vendor's account. And it doesn't represent the value of intangible assets like a company's reputation or brand, so it cannot be credited to the Goodwill account.
- Instead, the Rs. 20,000 gain is a capital reserve, which is created to strengthen the company's financial position. It can be used in the future for purposes such as expansion, payment of dividends, or to meet any other contingencies that may arise.
So, the balance of Rs. 20,000 will be credited to the Capital Reserve account.
Capital Reserve Account:
- Capital reserves are created from profits that are not intended for distribution as dividends to shareholders. They are created to strengthen the financial position of the company and to meet future contingencies or unforeseen situations.
- In this case, the company is receiving net assets of Rs. 1,20,000 in exchange for fully-paid shares of Rs. 1,00,000. This means that the company has gained Rs. 20,000 in value from the transaction.
- Since this gain is not a part of the company's normal operating activities, it cannot be credited to the Profit and Loss account. Similarly, it is not a payment made to the vendor, so it cannot be credited to the Vendor's account. And it doesn't represent the value of intangible assets like a company's reputation or brand, so it cannot be credited to the Goodwill account.
- Instead, the Rs. 20,000 gain is a capital reserve, which is created to strengthen the company's financial position. It can be used in the future for purposes such as expansion, payment of dividends, or to meet any other contingencies that may arise.
So, the balance of Rs. 20,000 will be credited to the Capital Reserve account.
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If vendors are issued fully paid shares of Rs. 1,00,000 in consideration of net assets of Rs. 1,20,000, the balance of Rs. 20,000 will be credited to:a)Goodwill accountb)Capital Reserve accountc)Vendor’s accountd)Profit and Loss accountCorrect answer is option 'B'. Can you explain this answer?
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If vendors are issued fully paid shares of Rs. 1,00,000 in consideration of net assets of Rs. 1,20,000, the balance of Rs. 20,000 will be credited to:a)Goodwill accountb)Capital Reserve accountc)Vendor’s accountd)Profit and Loss accountCorrect answer is option 'B'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about If vendors are issued fully paid shares of Rs. 1,00,000 in consideration of net assets of Rs. 1,20,000, the balance of Rs. 20,000 will be credited to:a)Goodwill accountb)Capital Reserve accountc)Vendor’s accountd)Profit and Loss accountCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If vendors are issued fully paid shares of Rs. 1,00,000 in consideration of net assets of Rs. 1,20,000, the balance of Rs. 20,000 will be credited to:a)Goodwill accountb)Capital Reserve accountc)Vendor’s accountd)Profit and Loss accountCorrect answer is option 'B'. Can you explain this answer?.
If vendors are issued fully paid shares of Rs. 1,00,000 in consideration of net assets of Rs. 1,20,000, the balance of Rs. 20,000 will be credited to:a)Goodwill accountb)Capital Reserve accountc)Vendor’s accountd)Profit and Loss accountCorrect answer is option 'B'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about If vendors are issued fully paid shares of Rs. 1,00,000 in consideration of net assets of Rs. 1,20,000, the balance of Rs. 20,000 will be credited to:a)Goodwill accountb)Capital Reserve accountc)Vendor’s accountd)Profit and Loss accountCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If vendors are issued fully paid shares of Rs. 1,00,000 in consideration of net assets of Rs. 1,20,000, the balance of Rs. 20,000 will be credited to:a)Goodwill accountb)Capital Reserve accountc)Vendor’s accountd)Profit and Loss accountCorrect answer is option 'B'. Can you explain this answer?.
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