Case: In an amalgamation in the nature of purchase, Aarav Ltd (transferee) agrees to bear the liquidation expenses of Bina Ltd (transferor) amounting to ₹50,000, and pays them. In Aarav Ltd's books, this amount is:

Correct answer: B) Debited to goodwill (or reduced from capital reserve) arising on amalgamation

Explanation

Liquidation expenses of the transferor borne by the transferee are not part of the purchase consideration because they are not paid to the transferor's shareholders. In the transferee's books, they are treated as a cost of acquisition and debited to goodwill or, where capital reserve arises, they reduce that capital reserve.