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Class 12AccountancyReconstitution - Admission of a PartnerReservesEasy
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The Investment Fluctuation Reserve has a balance of ₹10,000, while the fall in the value of investments is ₹14,000. What will be the accounting treatment of the excess ₹4,000?

Answer and explanation

Correct answer: Debit to Revaluation Account (loss)

The Investment Fluctuation Reserve can cover the fall in investments only up to ₹10,000. The remaining ₹4,000 is debited to the Revaluation Account as an additional loss. It is not credited to the General Reserve or the new partner’s capital account. Exam tip: subtract the available reserve from the total fall in investment; the balance is the revaluation loss.

Related tags

Investment Fluctuation ReserveRevaluation LossAdmission Of PartnerReservesAccounting TreatmentReconstitution Admission Of A PartnerAccountancyClass 12 Mcq
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10 more MCQs
  1. 1At the time of admission of a new partner to whom is general reserve given?
  2. 2At the time of admission how is credit balance of Profit and Loss Account treated?
  3. 3At the time of admission what does debit balance of Profit and Loss Account show?
  4. 4A and B share profits in the old ratio of 3:2. At the time of admission of a new partner, the general reserve is ₹50,000. How much will A receive from the general reserve?
  5. 5X and Y are partners sharing profits in the old ratio of 4:1. The firm's reserve fund is ₹25,000. On reconstitution of the partnership, what share of the reserve fund will Y receive?
  6. 6Why does the new partner not receive a share of the old General Reserve?
  7. 7Which is the correct journal entry for distributing general reserve?
  8. 8Which entry is made for writing off debit balance of Profit and Loss Account?
  9. 9Profit and Loss Account has credit balance ₹30000. A and B share in 2:1. How much will be credited to B?
  10. 10A firm's Profit and Loss Account has a debit balance of ₹18,000. Partners A and B share profits and losses in the old ratio of 5:4. What amount will be debited to A's Capital Account?
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