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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Nitin, Tarun and Amar are partners sharing profits equally and decide to share profits in the ratio of 2 : 2 : 1 w.e.f. 1st April, 2025. The extract of their Balance Sheet as at 31st March, 2025 shows an Investments Fluctuation Reserve of ₹60,000 and Investments (at cost) of ₹4,00,000. Pass the Journal entries in each of the following situations: (i) when Market Value is not given; (ii) when Market Value is ₹4,00,000; (iii) when Market Value is ₹4,24,000; (iv) when Market Value is ₹3,70,000; (v) when Market Value is ₹3,10,000.
Cases (i) & (ii) – no fall in value: the entire IFR is distributed equally.
JOURNAL
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| Investments Fluctuation Reserve A/c Dr. | 60,000 | |||
| To Nitin’s / Tarun’s / Amar’s Capital A/c (₹20,000 each) | 60,000 | |||
| (IFR distributed equally) |
Case (iii) – Market Value ₹4,24,000 (increase ₹24,000): IFR distributed in full and the appreciation credited as revaluation profit.
JOURNAL
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| Investments Fluctuation Reserve A/c Dr. | 60,000 | |||
| To Nitin’s / Tarun’s / Amar’s Capital A/c (₹20,000 each) | 60,000 | |||
| Investments A/c Dr. | 24,000 | |||
| To Revaluation A/c | 24,000 | |||
| Revaluation A/c Dr. | 24,000 | |||
| To Nitin’s / Tarun’s / Amar’s Capital A/c (₹8,000 each) | 24,000 | |||
| (IFR distributed; appreciation in investments credited in the old ratio) |
Case (iv) – Market Value ₹3,70,000 (fall ₹30,000): the fall is set off against the IFR; the balance is distributed equally.
JOURNAL
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| Investments Fluctuation Reserve A/c Dr. | 60,000 | |||
| To Investments A/c | 30,000 | |||
| To Nitin’s / Tarun’s / Amar’s Capital A/c (₹10,000 each) | 30,000 | |||
| (Fall in investments met out of IFR; balance distributed equally) |
Case (v) – Market Value ₹3,10,000 (fall ₹90,000): IFR ₹60,000 absorbs part of the fall; the balance ₹30,000 is a revaluation loss.
JOURNAL
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| Investments Fluctuation Reserve A/c Dr. | 60,000 | |||
| Revaluation A/c Dr. | 30,000 | |||
| To Investments A/c | 90,000 | |||
| Nitin’s / Tarun’s / Amar’s Capital A/c Dr. (₹10,000 each) | 30,000 | |||
| To Revaluation A/c | 30,000 | |||
| (Fall in investments set off against IFR; balance loss shared equally) |
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "T.S. Grewal Class 12 Chapter 3 Q.18 - Change in Profit-Sharing Ratio Among the Existing Partners", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 3 - Change in Profit-Sharing Ratio Among the Existing Partners.
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