Question:
Vishal and Pulkit were partners in a firm sharing profits and losses in the ratio of 7:3. Following is the extract of their Balance Sheet as on 31st March, 2024.
Liabilities:
Investment Fluctuation Fund ₹ 5,00,000
Workmen Compensation Fund ₹ 25,00,000
Assets:
Investments ₹ 50,00,000
On 1st April, 2024, Tarun was admitted for 1/10 share.
(i) Market value of investments ₹ 44,00,000.
(ii) Claim for workmen compensation ₹ 25,00,000.
Pass necessary journal entries.
Vishal and Pulkit were partners in a firm sharing profits and losses in the ratio of 7:3. Following is the extract of their Balance Sheet as on 31st March, 2024.
Liabilities:
Investment Fluctuation Fund ₹ 5,00,000
Workmen Compensation Fund ₹ 25,00,000 Assets: Investments ₹ 50,00,000 On 1st April, 2024, Tarun was admitted for 1/10 share. (i) Market value of investments ₹ 44,00,000.
(ii) Claim for workmen compensation ₹ 25,00,000. Pass necessary journal entries.
Workmen Compensation Fund ₹ 25,00,000 Assets: Investments ₹ 50,00,000 On 1st April, 2024, Tarun was admitted for 1/10 share. (i) Market value of investments ₹ 44,00,000.
(ii) Claim for workmen compensation ₹ 25,00,000. Pass necessary journal entries.
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Always compare actual vs expected claim or loss when adjusting specific reserves like IFF or WCF.
Updated On: Jul 7, 2025
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Solution and Explanation
Case 1: Investment Fluctuation Fund
- Book value of Investments = ₹ 50,00,000
- Market value = ₹ 44,00,000
- Loss = ₹ 6,00,000
- Investment Fluctuation Fund = ₹ 5,00,000
Thus, ₹ 5,00,000 from fund is used, balance ₹ 1,00,000 is loss to be transferred to partners’ capital accounts.
Journal Entry:
Investment Fluctuation Fund A/c Dr. ₹ 5,00,000
To Revaluation A/c ₹ 6,00,000
To Partners’ Capital A/c ₹ 1,00,000 Case 2: Workmen Compensation Fund - Fund = ₹ 25,00,000 - Estimated claim = ₹ 25,00,000 So, the entire fund will be used. No surplus or deficiency. Journal Entry:
Workmen Compensation Fund A/c Dr. ₹ 25,00,000
To Workmen Compensation Liability A/c ₹ 25,00,000 Final Answer: Necessary entries adjusting investment loss and claim are recorded through revaluation and liability account.
Investment Fluctuation Fund A/c Dr. ₹ 5,00,000
To Revaluation A/c ₹ 6,00,000
To Partners’ Capital A/c ₹ 1,00,000 Case 2: Workmen Compensation Fund - Fund = ₹ 25,00,000 - Estimated claim = ₹ 25,00,000 So, the entire fund will be used. No surplus or deficiency. Journal Entry:
Workmen Compensation Fund A/c Dr. ₹ 25,00,000
To Workmen Compensation Liability A/c ₹ 25,00,000 Final Answer: Necessary entries adjusting investment loss and claim are recorded through revaluation and liability account.
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