Question

Aarushi and Gauri are partners in a firm, sharing profits and losses in the ratio of 3 : 2. On 31st March, 2024, their Balance Sheet was as under:

Liabilities	₹	₹	Assets	₹
Sundry Creditors		1,50,000	Land and Building	3,00,000
General Reserve		60,000	Investments	2,00,000
Profit and Loss A/c		80,000	Sundry Debtors	1,10,000
Investment Fluctuation Reserve		50,000	Cash in Hand	30,000
Capital A/cs:
Aarushi	1,50,000
Gauri	1,50,000	3,00,000
		6,40,000		6,40,000

The partners decided that with effect from 1st April, 2024, they would share profits and losses equally.

You are required to answer the following alternate question:

If investments are valued at 1,70,000, then

Options

• Credit Aarushi and Gauri by ₹ 10,000 each

• Debit Aarushi and Gauri by ₹ 15,000 each

• Credit Aarushi by ₹ 12,000 and Guari by ₹ 8,000

• Debit Aarushi by ₹ 18,000 and Gauri by ₹ 12,000

Answer 1

Credit Aarushi by ₹ 12,000 and Guari by ₹ 8,000

Explanation:

Journal Entry for reduction in the value of Investments will be:

Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	Investment Fluctuation Reserve A/c   ...Dr.		50,000
	To Investments A/c			30,000
	To Aarushi's Capital A/c			12,000
	To Gauri's Capital A/с			8,000
	(Being loss on investments written off from Investment Fluctuation Reserve)