Comprehension From the information provided below, calculate various questions asked in questions Following is the Balance Sheet of Ashwani and Bharat on March 31, 2024. Balance Sheet Ashwani and Bharat as on March 31, 2024, Liabilities, Amount (₹), Assets, Amount (₹), Creditors, 76,000, Cash at bank, 17,000, Mrs.Ashwani's loan, 10,000, Stock, 10,000, Mrs.Bharat loan, 20,000, Investments, 20,000, Investment fluctuation reserve, 2,000, Debtors 40,000 Less: Provision for doubtful debts 4,000, 36,000, General Reserve, 20,000, Buildings, 70,000, Capitals: Ashwani 20,000 Bharat 20,000, 40,000, Goodwill, 15,000, Total, 1,68,000, Total, 1,68,000, The firm was dissolved on that date. The following was agreed transactions took place: 1. Ashwani promised to pay Mrs. Ashwani’s loan and took away stock for Rs. 8,000. 2. Bharat took away half of the investment at 10% less. Debtors realised for Rs. 38,000. Creditor’s were paid at less of Rs. 380. Buildings realised for Rs. 1,30,000. Goodwill Rs. 12,000 and the remaining Investment were sold at Rs. 9,000. An old typewriter not recorded in the books was taken over by Bharat for Rs. 600. Realisation expenses amounted to Rs. 2,000. Investment Fluctuation Reserve will be Option 1: Transferred to debit side of realization A/c Option 2: Transferred to credit side of realization A/c Option 3: Distributed amongst partners in profit sharing ratio Option 4: Subtracted from Value of Investment

Answer: Transferred to credit side of realization A/c. Solution: Investment Fluctuation Reserve is a reserve created to cover potential losses on investments. At the time of dissolution, this reserve needs to be closed and transferred to the Realization Account on the credit side. The treatment follows the general principle that all reserves and accumulated profits are transferred to the Realization Account when a firm is dissolved. Since Investment Fluctuation Reserve appears on the liabilities side of the Balance Sheet (with a credit balance), it is transferred to the credit side of Realization Account. This treatment is logical because: - The reserve was created to absorb fluctuations in investment values - At dissolution, when investments are actually realized, the reserve serves its purpose by being transferred to Realization Account - It helps in offsetting any profit or loss on realization of assets The Investment Fluctuation Reserve of ₹2,000 will be shown on the credit side of Realization Account along with other items like profit on realization (if any). Note: This is different from Provision for Doubtful Debts, which is deducted from Debtors and only the net realizable amount appears in Realization Account. Investment Fluctuation Reserve is not deducted from investments; instead, investments appear at book value in Realization Account, and the reserve is transferred separately to the credit side.

Partnership

Dissolution

Medium

Comprehension

From the information provided below, calculate various questions asked in questions

Following is the Balance Sheet of Ashwani and Bharat on March 31, 2024.

Balance Sheet Ashwani and Bharat as on March 31, 2024

Liabilities	Amount ( $₹$ )	Assets	Amount ( $₹$ )
Creditors	$76,000$	Cash at bank	$17,000$
Mrs.Ashwani's loan	$10,000$	Stock	$10,000$
Mrs.Bharat loan	$20,000$	Investments	$20,000$
Investment fluctuation reserve	$2,000$	Debtors $\quad 40,000$ Less: Provision for doubtful debts $\quad 4,000$	$36,000$
General Reserve	$20,000$	Buildings	$70,000$
Capitals: Ashwani $20,000$ Bharat $20,000$	$40,000$	Goodwill	$15,000$
Total	$1,68,000$	Total	$1,68,000$

The firm was dissolved on that date. The following was agreed transactions took place:

Ashwani promised to pay Mrs. Ashwani’s loan and took away stock for Rs. 8,000.
Bharat took away half of the investment at 10% less. Debtors realised for Rs. 38,000. Creditor’s were paid at less of Rs. 380. Buildings realised for Rs. 1,30,000. Goodwill Rs. 12,000 and the remaining Investment were sold at Rs. 9,000. An old typewriter not recorded in the books was taken over by Bharat for Rs. 600. Realisation expenses amounted to Rs. 2,000.

Investment Fluctuation Reserve will be

Transferred to debit side of realization A/c

Transferred to credit side of realization A/c

Distributed amongst partners in profit sharing ratio

Subtracted from Value of Investment

✅ Correct Option: 2

Investment Fluctuation Reserve is a reserve created to cover potential losses on investments. At the time of dissolution, this reserve needs to be closed and transferred to the Realization Account on the credit side.

The treatment follows the general principle that all reserves and accumulated profits are transferred to the Realization Account when a firm is dissolved. Since Investment Fluctuation Reserve appears on the liabilities side of the Balance Sheet (with a credit balance), it is transferred to the credit side of Realization Account.

This treatment is logical because:

The reserve was created to absorb fluctuations in investment values
At dissolution, when investments are actually realized, the reserve serves its purpose by being transferred to Realization Account
It helps in offsetting any profit or loss on realization of assets

The Investment Fluctuation Reserve of ₹2,000 will be shown on the credit side of Realization Account along with other items like profit on realization (if any).

Note: This is different from Provision for Doubtful Debts, which is deducted from Debtors and only the net realizable amount appears in Realization Account. Investment Fluctuation Reserve is not deducted from investments; instead, investments appear at book value in Realization Account, and the reserve is transferred separately to the credit side.

2026: 11 May Shift 2

When the firm is dissolved, its books of account are to be closed and the profit or loss arising on realisation of its assets and discharge of liabilities is to be computed. For this purpose, a Realisation Account is prepared. Identify correct statements related to Realisation Account.

A. Transfer all assets (other than cash in hand, bank balance and fictitious assets, if any), and all external liabilities to this account.

B. The balance in this account is not transferred to partners' capital accounts in the profit sharing ratio.

C. The balance in this account is transferred to partners' capital accounts in the profit sharing ratio.

D. Ascertain the net effect (profit or loss) of realisation of assets and payment of liabilities.

Choose the correct answer from the options given below:

2025: 4 June Shift 2

As per Section 48 of the Partnership Act 1932, which of the following will be utilized for payment of losses, including deficiencies of capital:

(A) Out of Profits

(B) Out of capital of Partners

(D) Creditors Assets

Choose the correct answer from the options given below:

2025: 3 June Shift 1

When a partnership firm is being dissolved, the private property of any partner shall be applied first, in payment of __________ and the surplus, if any, may be utilised for payment of __________, in case the firm's liabilities exceed the firm's assets.

2022: 23 Aug Shift 2

On 1st April 2022, A, B and C decided to dissolve their firm On the date of dissolution, Sundry debtors appeared in Balance Sheet at Rs. 6,00,000 and Provision for doubtful debt at Rs. 30,000 Debtors to extent of Rs. 60,000 were bad. In journal entry for realisation of debtors.

2023: 20 June Shift 2

Unrecorded assets when taken over by a partner on dissolution are shown in:

2026: 29 May Shift 1

Creditors are transferred to __________ on the dissolution of the firm.

Comprehension

Balance Sheet Ashwani and Bharat as on March 31, 2024

Investment Fluctuation Reserve will be

Solution

Related questions:

Keyboard Shortcuts

CUET Accountancy Past Year Questions (Topic-Wise)