Question

The balance in the investments Fluctuation Fund, after meeting the loss on revaluation of investment at the time of admission of a partner will be transferred to _____________ .

• A. The old Partners Capital Accounts
• B. The Revaluation Account
• C. The general Reserve
• D. None of the above

Answer 1

The correct option is A The old Partners Capital Accounts

At the time of admission of a partner, the firm is reconstituted and all accumulated reserves are distributed. Investment fluctuation reserve is made to prevent any loss from a sudden fall in the value of investments. If at the time of revaluation of investments there is a fall in price of the investments, this loss is deducted from the investment fluctuation reserve and is distributed among the old partners in their profit sharing ratio.

The accounting entry is:

Investment Fluctuation Reserve a/c....

To Partner's capital a/c