Question:
Sudhir and Balbir were partners in a firm sharing profits and losses in the ratio of 5 : 4. The following is the extract of their Balance Sheet as at 31st March, 2024:
Balance Sheet of Sudhir and Balbir as at 31\textsuperscript{st March, 2024}
Liabilities Amount (₹) Assets Amount (₹) Investment Fluctuation Fund 15,00,000 Investments 75,00,000 Workmen Compensation Fund 50,00,000
On 1st April, 2024, Sushant was admitted as a new partner for \(\frac{1}{9}\)th share in the profits of the firm on the following terms:
(i) Market value of investments was ₹ 60,00,000.
(ii) Claim on account of Workmen Compensation was estimated at ₹ 41,00,000.
Pass necessary journal entries for treatment of Investment Fluctuation Fund and Workmen Compensation Fund on the date of Sushant’s admission.
Sudhir and Balbir were partners in a firm sharing profits and losses in the ratio of 5 : 4. The following is the extract of their Balance Sheet as at 31st March, 2024:
Balance Sheet of Sudhir and Balbir as at 31\textsuperscript{st March, 2024}
On 1st April, 2024, Sushant was admitted as a new partner for \(\frac{1}{9}\)th share in the profits of the firm on the following terms:
(i) Market value of investments was ₹ 60,00,000.
(ii) Claim on account of Workmen Compensation was estimated at ₹ 41,00,000.
Pass necessary journal entries for treatment of Investment Fluctuation Fund and Workmen Compensation Fund on the date of Sushant’s admission.
Balance Sheet of Sudhir and Balbir as at 31\textsuperscript{st March, 2024}
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Investment Fluctuation Fund | 15,00,000 | Investments | 75,00,000 |
| Workmen Compensation Fund | 50,00,000 |
On 1st April, 2024, Sushant was admitted as a new partner for \(\frac{1}{9}\)th share in the profits of the firm on the following terms:
(i) Market value of investments was ₹ 60,00,000.
(ii) Claim on account of Workmen Compensation was estimated at ₹ 41,00,000.
Pass necessary journal entries for treatment of Investment Fluctuation Fund and Workmen Compensation Fund on the date of Sushant’s admission.
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Always compare the liability with the fund balance to determine any excess for distribution.
Updated On: Jul 7, 2025
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Solution and Explanation
\underline{Journal Entries:}
1. Investment Fluctuation Fund
Decrease in value of Investments = ₹ 75,00,000 - ₹ 60,00,000 = ₹ 15,00,000
Entire IFF is utilised. No further entry is required as decrease = IFF balance.
No Journal Entry needed.
2. Workmen Compensation Fund
Excess fund = ₹ 50,00,000 – ₹ 41,00,000 = ₹ 9,00,000
Journal Entry:
Workmen Compensation Fund A/c Dr. ₹ 9,00,000
\hspace{1cm} To Sudhir’s Capital A/c ₹ 5,00,000
\hspace{1cm} To Balbir’s Capital A/c ₹ 4,00,000
(Being excess WCF distributed in old ratio 5 : 4)
1. Investment Fluctuation Fund
Decrease in value of Investments = ₹ 75,00,000 - ₹ 60,00,000 = ₹ 15,00,000
Entire IFF is utilised. No further entry is required as decrease = IFF balance.
No Journal Entry needed.
2. Workmen Compensation Fund
Excess fund = ₹ 50,00,000 – ₹ 41,00,000 = ₹ 9,00,000
Journal Entry:
Workmen Compensation Fund A/c Dr. ₹ 9,00,000
\hspace{1cm} To Sudhir’s Capital A/c ₹ 5,00,000
\hspace{1cm} To Balbir’s Capital A/c ₹ 4,00,000
(Being excess WCF distributed in old ratio 5 : 4)
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