Question:
Vinay and Pankaj were partners in a firm sharing profits and losses in the ratio of 3 : 2. The following is the extract of their Balance Sheet as at 31st March, 2024 :
Balance Sheet of Vinay and Pankaj as at 31st March, 2024Liabilities Amount (₹) Assets Amount (₹) Investment Fluctuation Fund 6,00,000 Investments 15,00,000 Workmen Compensation Fund 8,00,000
On 1st April, 2024, Parth was admitted as a new partner for \(\frac{1}{5}\) share in the profits of the firm on the following terms:
Market value of investments was \u20b9 13,00,000.
Claim on account of Workmen Compensation was estimated at \u20b9 9,00,000.
Pass necessary journal entries for treatment of Investment Fluctuation Fund and Workmen Compensation Fund on the date of Parth\u2019s admission.
Vinay and Pankaj were partners in a firm sharing profits and losses in the ratio of 3 : 2. The following is the extract of their Balance Sheet as at 31st March, 2024 :
Balance Sheet of Vinay and Pankaj as at 31st March, 2024
On 1st April, 2024, Parth was admitted as a new partner for \(\frac{1}{5}\) share in the profits of the firm on the following terms:
Market value of investments was \u20b9 13,00,000.
Claim on account of Workmen Compensation was estimated at \u20b9 9,00,000.
Pass necessary journal entries for treatment of Investment Fluctuation Fund and Workmen Compensation Fund on the date of Parth\u2019s admission.
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Investment Fluctuation Fund | 6,00,000 | Investments | 15,00,000 |
| Workmen Compensation Fund | 8,00,000 |
Market value of investments was \u20b9 13,00,000.
Claim on account of Workmen Compensation was estimated at \u20b9 9,00,000.
Pass necessary journal entries for treatment of Investment Fluctuation Fund and Workmen Compensation Fund on the date of Parth\u2019s admission.
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Always adjust fund balances against actual liability or asset revaluation, and distribute surplus or shortfall among old partners in the old ratio.
Updated On: Jul 7, 2025
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Solution and Explanation
Investment Fluctuation Fund Adjustment
Book Value of Investments: ₹15,00,000
Market Value of Investments: ₹13,00,000
Decrease in Value: ₹2,00,000
IFF Balance: ₹6,00,000
Excess in IFF: ₹4,00,000 (₹6,00,000 − ₹2,00,000) to be distributed in 3:2 ratio
| Particulars | Dr (₹) | Cr (₹) |
|---|---|---|
| Investment Fluctuation Fund A/c | 6,00,000 | |
| To Investments A/c | 2,00,000 | |
| To Vinay’s Capital A/c | 2,40,000 | |
| To Pankaj’s Capital A/c | 1,60,000 | |
| (Being IFF adjusted for decrease in investment value and remaining balance distributed in old ratio 3:2) | ||
Workmen Compensation Fund Adjustment
WCF Balance: ₹8,00,000
Claim: ₹9,00,000
Deficiency: ₹1,00,000 (₹9,00,000 − ₹8,00,000) to be borne by Vinay and Pankaj in 3:2
| Particulars | Dr (₹) | Cr (₹) |
|---|---|---|
| Workmen Compensation Fund A/c | 8,00,000 | |
| Vinay’s Capital A/c | 60,000 | |
| Pankaj’s Capital A/c | 40,000 | |
| To Workmen Compensation Claim A/c | 9,00,000 | |
| (Being WCF transferred to claim and deficiency borne by old partners in 3:2 ratio) | ||
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