Question

A, B and C are partners sharing profits and losses in the ratio of 2 : 2 : 1. A retires and the new ratio between B and C is agreed at 3 : 2. Give journal entries on A's retirement in the following case:

Investment Fluctuation Reserve appears in the books at ₹ 40,000, when Investments (market value ₹ 1,00,000) appear at ₹ 85,000.

Answer 1

Journal entry
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Investment Fluctuation Reserve A/c    ...Dr.		40,000
	To A’s Capital A/c			16,000
	To B’s Capital A/c			16,000
	To C’s Capital A/c			8,000
	(Being the distribution of the Investment Fluctuation Reserve in the old ratio)
2.	Investments A/c     ...Dr.		15,000
	To Revaluation A/c			15,000
	(Being the loss on revaluation of investments)
3.	Revaluation A/c          ...Dr.		15,000
	To A’s Capital A/c			6,000
	To B’s Capital A/c			6,000
	To C’s Capital A/c			3,000
	(Being the loss on revaluation transferred to the partner’s capital accounts)