If the value of debentures allotted to vendors for acquiring some assets as payment for purchase consideration is less than the agreed purchase price, the difference is debited to ______.

Capital reserve account

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Debenture suspense account

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Goodwill account

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Profit & loss account

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Solution

The correct option is B Capital reserve account
Capital Reserve is a type of profit that is earned on capital transactions. The profit arising from the forfeiture of shares, share premium, Capital Redemption Reserve or Debenture Redemption Reserve are some examples. Profits put into capital reserve are not available to share holders for distribution and can be used for specified purposes only - such as writing off Goodwill, issue of bonus shares, and writing off any loss on issue or redemption of shares or debentures.

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