Question 18 Chapter 4 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Posted by By Shubham Sharma 12 Min Read September 23, 2022
Question 18 Chapter 4 of +2-A
Question No.18 Chapter No.4 - T.S. Grewal +2 Book 2019-Solution

Question 18 Chapter 4 of +2-A

18. 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, 2019. The extract of their Balance Sheet as at 31st March, 2019 is as follows:

Liabilities   Assets  
Investments Fluctuation Reserve 60,000 Investments (At Cost) 4,00,000

Pass the Journal entries in each of the following situations:

  1. When its Market Value is not given;
  2. When its Market Value is 4,00,000;
  3. When its Market Value is 4,24,000;
  4. When its Market Value is 3,70,000;
  5. When its Market Value is 3,10,000.

The solution of Question 18 Chapter 4 of +2-A

In the cases I & II – The following journal entry will be posted in the books

In the Books of _______________
Date Particulars
 L.F. Debit Credit
2019          
31st March Investment Fluctuation Reserve A/c Dr   60,000  
  To Nitin’s Capital A/c*1       20,000
  To Tarun’s Capital A/c*1       20,000
  To Amar’s Capital A/c *1       20,000
  (Being Adjustment for Investment Fluctuation Reserve)        
           

 

Working Note :

WN *1 Calculation of Share of Investment Fluctuation Reserve –
In the case I & II – The full amount of I.F.R distributed amount the partners because there is no fluctuation in the investment.

Amount to be Credited to Nitin’s Capital = 60,000 X 1
3
  = 20,000    

 

Amount to be Credited to Tarun’s Capital = 60,000 X 1
3
  = 20,000    

 

Amount to be Credited to Amar’s Capital = 60,000 X 1
3
  = 20,000    

 

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In case III – The following journal entry will be posted in the books

 

In the Books of _______________
Date Particulars
 L.F. Debit Credit
2019          
April 1 Investment Fluctuation Reserve A/c Dr   60,000  
  To Nitin’s Capital A/c*1       20,000
  To Tarun’s Capital A/c*1       20,000
  To Amar’s Capital A/c *1       20,000
  (Being Adjustment for Investment Fluctuation Reserve)        
  Investment A/c Dr   24,000  
  To Revaluation A/c       24,000
  (Being increase in the value of investment )        
  Revaluation A/c Dr   24,000  
  To Nitin’s Capital A/c*1       8,000
  To Tarun’s Capital A/c*1       8,000
  To Amar’s Capital A/c *1       8,000
  (Being revaluation is profit distributed )        

 

Working Note :

WN *2 Calculation of Share of Investment Fluctuation Reserve – 
In the case III – The full amount of I.F.R distributed amount the partners because there is increase in the value of investment. The amount of increase in the value of the investment will be transferred to the revaluation a/c.

Amount to be Credited to Nitin’s Capital = 60,000 X 1
3
  = 20,000    

 

Amount to be Credited to Tarun’s Capital = 60,000 X 1
3
  = 20,000    

 

Amount to be Credited to Amar’s Capital = 60,000 X 1
3
  = 20,000    

 

In the case IV – The following journal entry will be posted in the books

 

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In the Books of _______________
Date Particulars
 L.F. Debit Credit
2019          
April 1 Investment Fluctuation Reserve A/c Dr   60,000  
  To Investment A/c *3       30,000
  To Nitin’s Capital A/c*3       10,000
  To Tarun’s Capital A/c*3       10,000
  To Amar’s Capital A/c *3       10,000
  (Being Adjustment for Investment Fluctuation Reserve)        

 

Working Note : –

WN *3 Calculation of Share of Investment Fluctuation Reserve –
In the case IV – The amount of I.F.R distributed as following: –

Distributable Amount of I.F.R. = Total I.F.R. Balance – (Difference between Market value and Cost)
  = 60,000 – (3,70,000 – 4,00,000)
Distributable Amount of I.F.R. = 30,000

 

Amount to be Credited to Nitin’s Capital = 30,000 X 1
3
  = 10,000    

 

Amount to be Credited to Tarun’s Capital = 30,000 X 1
3
  = 10,000    

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Amount to be Credited to Amar’s Capital = 30,000 X 1
3
  = 10,000    

In the case V – The following journal entry will be posted in the books

 

In the Books of _______________
Date Particulars
 L.F. Debit Credit
2019          
April 1 Investment Fluctuation Reserve A/c Dr   60,000  
  Revaluation A/c Dr   30,000  
  To Investment A/c       90,000
  (Being total decrease in the value of the investment is Rs 90,000 and 60000 adjusted with the I.F.R account and balance from the revaluation a/c)        
  Nitin’s Capital A/c *4 Dr   10,000  
  Tarun’s Capital A/c *4 Dr   10,000  
  Amar’s Capital A/c *4 Dr   10,000  
  To Revaluation A/c *3       30,000
  (Being revaluation is Loss distributed )        

 

Working Note : –

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WN *4 Calculation of Share of Investment Fluctuation Reserve – 
In the case IV – The amount of I.F.R distributed as following: –

Distributable Amount of I.F.R. = Total I.F.R. Balance – (Difference between Market value and Cost)
  = 60,000 – (3,10,000 – 4,00,000)
Distributable Amount of I.F.R. = (-)30,000

 

Amount to be Credited to Nitin’s Capital = 30,000 X 1
3
  = 10,000    

 

Amount to be Credited to Tarun’s Capital = 30,000 X 1
3
  = 10,000    

 

Amount to be Credited to Amar’s Capital = 30,000 X 1
3
  = 10,000    

 

 

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

  • Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
  • Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
  • Chapter No. 3 – Goodwill: Nature and Valuation
  • Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
  • Chapter No. 5 – Admission of a Partner
  • Chapter No. 6 – Retirement/Death of a Partner
  • Chapter No. 7 – Dissolution of a Partnership Firm

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

  • Chapter No. 1 – Financial Statements of a Company
  • Chapter No. 2 – Financial Statement Analysis 
  • Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
  • Chapter No. 4 – Accounting Ratios
  • Chapter No. 5 – Cash Flow Statement

 

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

+2 Book 1-min
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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