Under pooling interest method, the difference between the purchase consideration and share capital of the transferee company should be adjusted to

The correct answer is: C. Goodwill or Capital Reserve A/c

Under the pooling of interest method, the assets and liabilities of the two companies are combined at their book values. The difference between the purchase consideration and the share capital of the transferee company is adjusted to goodwill or capital reserve.

Goodwill is an intangible asset that arises when the purchase consideration exceeds the fair value of the net assets acquired. Capital reserve is a reserve that is created when the purchase consideration is less than the fair value of the net assets acquired.

The pooling of interest method is a method of accounting for a business combination in which the assets and liabilities of the two companies are combined at their book values. The method is based on the assumption that the business combination is a uniting of interests rather than an acquisition.

The pooling of interest method is no longer permitted under US GAAP or IFRS. However, it may still be used for business combinations that occurred before the effective date of the new accounting standards.

Here is a brief explanation of each option:

• General Reserve A/c is a reserve that is created to account for unrealized gains or losses on assets or liabilities. It is not used to account for the difference between the purchase consideration and the share capital of the transferee company.
• Amalgamation Adjustment A/c is a reserve that is created to account for the difference between the purchase consideration and the fair value of the net assets acquired in a business combination. It is not used to account for the difference between the purchase consideration and the share capital of the transferee company.
• Goodwill or Capital Reserve A/c is used to account for the difference between the purchase consideration and the share capital of the transferee company. The amount is transferred to goodwill if the purchase consideration exceeds the fair value of the net assets acquired, and to capital reserve if the purchase consideration is less than the fair value of the net assets acquired.