Class 12 Accountancy Notes · GSEB

Issue for Consideration Other Than Cash

Issue for Consideration Other Than Cash — Learn all four non-cash issue situations and the goodwill/capital-reserve rule with worked sums. GSEB Class 12 Commerce Accountancy notes.

Last updated: 29 Sep 2026

Notes

Four Circumstances (VSQ Home)

A company does not receive cash against an issue of shares when one of these four things is happening. Both VSQ 4 and VSQ 5 ask for this list.

Purchase: Assets A/c Dr / To Vendor’s A/c

Issue of shares: Vendor’s A/c Dr / To Equity share capital A/c (and To Securities premium A/c if any)

Part cash: Vendor’s A/c Dr / To Share capital / To Securities premium / To Bank A/c

Business purchase: compare purchase consideration with NET ASSETS (assets − liabilities)

What your VSQ tests here

VSQ 4 = VSQ 5 (same answer) — the four circumstances above.⭐ Such shares are shown separately in the Balance Sheet under ‘Share capital’ — the examiner looks for that word.

✗ Wrong way — pay the vendor in cash you do not have

A newly formed company buys machinery worth ₹ 40 lakh and then tries to arrange a bank loan to pay for it. Cash leaves, the loan bites interest, and the share capital never grows.

✓ Right way — settle the vendor with shares

The same machinery is acquired by issuing shares to the vendor. No cash moves, the vendor becomes a shareholder, and the liability closes in one entry.

Purchase of Business — Goodwill vs Capital Reserve

Net assets

Net assets = Total assets acquired − Liabilities assumed

84,00,000 − 8,00,000 = 76,00,000

Goodwill

Goodwill = Purchase consideration − Net assets (when positive)

80,00,000 − 76,00,000 = ₹ 4,00,000

Capital reserve

Capital reserve = Net assets − Purchase consideration (when positive)

76,00,000 − 70,00,000 = ₹ 6,00,000

The one-line rule

Pay more than the net assets are worth → the extra is Goodwill A/c Dr. Pay less than they are worth → the saving is Capital Reserve A/c Cr. Same arithmetic, two directions.

Illustration 19 — Aakash Ltd takes over Patel Brothers' business
Asset / liability acquired	Amount (₹)
Land and building	28,00,000
Plant and machinery	16,00,000
Vehicles and furniture	20,00,000
Debtors	4,00,000
Stock	8,00,000
Bills receivable	8,00,000
Total assets acquired	84,00,000
Less: Creditors (liabilities assumed)	8,00,000
Net assets	76,00,000

Solved Example

Problem

Variant 1 — issue 8,00,000 shares of ₹ 10 (purchase consideration ₹ 80,00,000) for the same business.

Solution

Entry 1: Dr Land & building 28,00,000; Dr Plant & machinery 16,00,000; Dr Vehicles & furniture 20,00,000; Dr Debtors 4,00,000; Dr Stock 8,00,000; Dr Bills receivable 8,00,000; Dr Goodwill 4,00,000 To Creditors 8,00,000; To Patel Brothers 80,00,000 Entry 2: Dr Patel Brothers 80,00,000 To Equity share capital 80,00,000

Solved Example

Problem

Variant 2 — issue 3,50,000 shares of ₹ 10 at a premium of ₹ 10 (purchase consideration ₹ 70,00,000) for the same business.

Solution

Entry 1: (same assets) To Creditors 8,00,000; To Capital reserve 6,00,000; To Patel Brothers 70,00,000 Entry 2: Dr Patel Brothers 70,00,000 To Equity share capital 35,00,000 (3,50,000 × ₹ 10) To Securities premium 35,00,000 (3,50,000 × ₹ 10)

Why this connects back to Topic 1

The goodwill/capital-reserve rule is the sum skill for this topic — and it also explains why profit on re-issue and premium on issue sit inside capital reserves: both are capital profits, exactly like a capital reserve created on a business purchase.

Worked Board Sums

Type — Consideration Other Than Cash: Board Sums

3 problems

Aakash Ltd: (a) 8,00,000 shares of ₹ 10 issued for Patel Brothers’ business (net assets 76,00,000); (b) 3,50,000 shares of ₹ 10 at premium ₹ 10 for the same business.(a) Goodwill 4,00,000, purchase consideration 80,00,000 · (b) Capital reserve 6,00,000, purchase consideration 70,00,000 (35,00,000 capital + 35,00,000 premium)

Both variants are taught above — the only difference is which side the balancing figure lands on.

12,000 equity shares of ₹ 10 issued to a promoter in lieu of remuneration payable for services rendered during formation.Incorporation or formation expenses A/c Dr 1,20,000 / To Equity share capital A/c 1,20,000

Equity shares of ₹ 80,000 issued towards remuneration payable to a person rendering services to the company.Remuneration to respective service A/c Dr 80,000 / To Equity share capital A/c 80,000

Key Takeaways

Four non-cash circumstances: assets/business, promoters, underwriters, bonus shares — VSQ 4 and VSQ 5.
Purchase of business: purchase consideration vs net assets → greater means Goodwill Dr, lesser means Capital Reserve Cr.
The vendor entry always closes the liability: Vendor’s A/c Dr / To Share capital (+ premium) (+ Bank if part cash).
Underwriting exists to guarantee the 90% minimum subscription.
Bonus shares: provide from reserves first, then issue to capital — no cash is involved anywhere.
All these shares are disclosed separately under Share capital in the Balance Sheet.