Question

Bat, Cat and Rat were partners sharing profits and losses in the ratio 5 : 3 : 2. Cat retired and on that date there was a balance of investment of ₹ 4,00,000 and Investment Fluctuation Reserve of ₹ 1,00,000 was appearing in the balance sheet.

Pass necessary journal entries for Investment Fluctuation reserve in the following cases.

1. Market Value of Investments was ₹ 4,80,000.
2. Market Value of Investments was ₹ 3,80,000.
3. Market Value of Investments was ₹ 2,90,000.

Answer 1

Journal Entries
Date	Particulars	Debit	Credit
(i)	Investment Fluctuation Reserve A/c     ...Dr.	1,00,000
	To Bat’s capital A/c		50,000
	To Cat’s capital A/c		30,000
	To Rat’s capital A/c		20,000
	(Being Invest. Fluctuation Reserve distributed)
	Investment A/c     ...Dr.	80,000
	To Revaluation A/c		80,000
	(Being Increase in investment recorded)
	Revaluation A/c     ...Dr.	80,000
	To Bat capital A/c		40,000
	To Cat capital A/c		24,000
	To Rat capital A/c		16,000
	(Being Gain on revaluation transferred to partners)
(ii)	Investment Fluctuation Reserve A/c     ...Dr.	1,00,000
	To Bat’s capital A/c		40,000
	To Cat’s capital A/c		24,000
	To Rat’s capital A/c		16,000
	To Investment A/c		20,000
	(Being decrease in investment recorded and balance Invest. Fluctuation Reserve distributed)
(iii)	Investment Fluctuation Reserve A/c     ...Dr.	1,00,000
	Revaluation A/c     ...Dr.	10,000
	To Investment A/c		1,10,000
	(Being decrease in investment recorded)
	Bat’s capital A/c     ...Dr	5,000
	Cat’s capital A/c     ...Dr.	3,000
	Rat’s capital A/c     ...Dr.	2,000
	To Revaluation A/c		10,000
	(Being Loss on revaluation distributed among the partners)