Vedesh Ltd. purchased a running business of Vibhu Enterprises for a sum of ₹ 12,00,000. Vedesh Ltd. paid ₹ 60,000 by drawing a promissory note in favour of Vibhu Enterprises., ₹1,90,000 through bank draft and balance by issue of 8% debentures of ₹ 100 each at a discount of 5%. The assets and liabilities of Vibhu Enterprises consisted of Fixed Assets valued at ₹ 17,30,000 and Trade Payables at ₹ 3,20,000. You are required to pass necessary journal entries in the books of Vedesh Ltd.
Answer
| Date | Particulars | L.F | Dr (Amount) | Cr (Amount) |
| Sundry Assets A/c Dr | 1730000 | |||
| To Sundry Liabilities | 320000 | |||
| To Vibhu Enterprises | 1200000 | |||
| To Capital Reserve | 210000 | |||
| (Purchase of Business of Vibhu Enterprises) |
NOTE : When Net assets value exceeds purchase consideration, Capital Reserve appears
When Net assets value is less than purchase consideration, Good will appears.
| Date | Particulars | L.F | Dr (Amount) | Cr (Amount) |
| Vedesh Ltd. Dr | 1200000 | |||
| Discount on Issue of Debentures A/c Dr | 50000 | |||
| To Promissory Note | 60000 | |||
| To Bank Draft | 190000 | |||
| To 8% Debentures A/c | 1000000 | |||
| (Being issue of bank draft, acceptance of bill and issue of 8% debentures in settlement of purchase consideration) |
| Particular | Amount |
| Amount to be paid to Vedesh | 1200000 |
| Less : Promissory Note given | 60000 |
| Less : Bank Draft Given | 190000 |
| Amount to be received from debentures after 5% Discount | 950000 |
