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A, B and C share profits in the ratio 3:4:5. The Investment Fluctuation Reserve is ₹96,000, and the loss on investment is ₹24,000. After adjusting the loss, how much will be credited to C’s account?

Answer and explanation

Correct answer: ₹30,000

The investment loss of ₹24,000 is first adjusted against the Investment Fluctuation Reserve of ₹96,000, leaving ₹72,000. This balance is credited to the partners in the old profit-sharing ratio of 3:4:5. C’s share is 5/12, so the amount credited is ₹72,000 × 5/12 = ₹30,000. ₹24,000 represents only the loss, whereas ₹72,000 is the distributable balance. Exam tip: Deduct the loss from the reserve and distribute the remaining amount in the old ratio.

Related tags

Investment Fluctuation ReserveInvestment LossOld Profit Sharing RatioAdmission Of A PartnerReservesReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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