Q:- A and B sharing profits and losses in the ratio of 3 : 2 decide to admit C for
1/3rd share. On this date, their Balance Sheet disclosed the following items:
Investments Fluctuation Reserve RS 40,000
Investments (at cost) RS 3,00,000
Show the accounting treatment in the following cases :
Case (1) If the market value of investments is 2,90,000
Case (ii) If the market value of investments is 2,45,000
Case (iii) If the market value of investments is 3,00,000
Case (iv) If the market value of investments is 3,25,000
Answers
Case 1 -
Investment Fluctuation Reserve a/c Dr ₹40,000
To A's Capital a/c ₹24,000
To B's Capital a/c ₹16,000
(Being investment fluctuation reserve distributed among old partners)
Case 2 -
Investment Fluctuation Reserve a/c Dr ₹40,000
Investment a/c Dr ₹30,000
To Revaluation a/c ₹30,000
To A's Capital a/c ₹24,000
To B's Capital a/c ₹16,000
(Being appreciated value of investment transferred to revaluation a/c & Investment fluctuation reserve distributed among old partners)
Case 3 -
Investment Fluctuation Reserve a/c Dr ₹40,000
To Investment a/c ₹30,000
To A's Capital a/c ₹6,000
To B's Capital a/c ₹4,000
(Being excess investment fluctuation reserve transferred to old partners capital a/c)
Case 4 -
Investment Fluctuation Reserve a/c Dr ₹40,000
Revaluation a/c Dr ₹60,000
To Investment a/c ₹1,00,000
(Being invesment fluctuation reserve used to adjust with market value of investment and excess loss transferred to revaluation a/c)
I hope it helps :)