Purchase consideration refers to the amount paid by a purchasing company to a vendor company for taking over its assets and liabilities. It is the price payable by the purchasing company to the vendor as a consideration for the business taken over. The purchase consideration can be paid in cash, shares, or debentures, or any other assets as agreed between the companies. The amount of purchase consideration can be computed under any of the following four methods:

1. Lump sum method: Under this method, purchase consideration will be paid in a lump sum as per the valuation of purchasing companies’ valuation.
2. Net asset method: Under this method, purchase consideration is calculated by adding up the values of various assets taken over by the purchasing company and subtracting the value of liabilities taken over.
3. Net payment method: Under this method, purchase consideration is the total of shares, debentures, and cash which are to be paid for claims of equity and preference shareholders of the transferor company.
4. Goodwill or Capital Reserve method: Under this method, the purchase consideration is calculated by adding the fair value of net assets to the value of goodwill or capital reserve.

It is important to note that the values of assets and liabilities for the purpose of calculation of purchase consideration are those which are agreed upon between the purchasing company and the vendor company and not the values at which the various assets and liabilities appear in the balance sheet of the vendor company.