{"id":1468,"date":"2019-06-24T16:15:35","date_gmt":"2019-06-24T16:15:35","guid":{"rendered":"https:\/\/commerceiets.com\/?p=1468"},"modified":"2019-06-24T16:15:35","modified_gmt":"2019-06-24T16:15:35","slug":"investment-fluctuation-reserve","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/investment-fluctuation-reserve\/","title":{"rendered":"INVESTMENT FLUCTUATION RESERVE"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\"><strong>INVESTMENT FLUCTUATION RESERVE<\/strong><\/h2>\n\n\n\n<p>Investment Fluctuation Reserve is a reserve created out of the profits to meet the fall in the market value of investments. It is created to adjust the difference between the book value and market value of investment. Excess of IFR over difference between book value and market value is credited to old partners in their old profit sharing ratio.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"585\" height=\"340\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/image-4.png\" alt=\"\" class=\"wp-image-1469\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/image-4.png 585w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/image-4-300x174.png 300w\" sizes=\"(max-width: 585px) 100vw, 585px\" \/><\/figure>\n\n\n\n<p class=\"has-background has-luminous-vivid-amber-background-color\"><strong>IF BOOK VALUE AND MARKET VALUE IS SAME:<\/strong><\/p>\n\n\n\n<p>The amount of IFR is transferred to Old <a href=\"https:\/\/commerceiets.com\/partners-capital-accounts\/\">partner\u2019s Capital<\/a> or Current Accounts in their old profit sharing ratio.<\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td> Investment   Fluctuation Reserve A\/c &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Dr.   &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br \/>            To Old Partner\u2019s Capital\/ Current   A\/cs&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(In   Old Ratio)   <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p class=\"has-background has-luminous-vivid-amber-background-color\"><strong>IF MARKET VALUE OF INVESTMENT IS LESS THAN THE BOOK VALUE:<\/strong><\/p>\n\n\n\n<p>In such a case, treatment of IFR depends upon the quantum of decrease. There can be three possibilities:<\/p>\n\n\n\n<p><strong><em>Fall in value is less than IFR:<\/em><\/strong> IFR, to the extent of fall in the value , is transferred to Investment Account and the balance is distributed among the old partners in their old profit sharing ratio. The entry is:<\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>Investment   Fluctuation Reserve A\/c&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Dr.   <br \/>               To   Investment A\/c &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (Book   Value- Market Value)   <br \/>               To Old   Partner\u2019s Capital\/ Current A\/cs   <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><em><strong>Fall in the value is equal to IFR:<\/strong><\/em> The amount of IFR is transferred to Investment Account and no amount is distributed among the old partners. The entry is: <\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>Investment   Fluctuation Reserve A\/c&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Dr.   <br \/>               To   Investment A\/c &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;    <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Fall in the value is More than IFR:<\/em><\/strong> In this situation, the amount of IFR along with the balance amount of fall in the value is transferred to Investment Account. The amount in excess of amount of Investment Fluctuation Reserve is debited to <a href=\"https:\/\/commerceiets.com\/revaluation-account\/\">Revaluation Account<\/a>. Loss on such Revaluation is transferred to old partner\u2019s Capital Accounts in their old profit sharing ratio. The journal entries passed are:<\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>Investment   Fluctuation Reserve A\/c&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Dr.   <br \/>Revaluation   A\/c&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;     &nbsp;&nbsp;&nbsp; Dr.   &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br \/>                To Investment A\/c   <br \/>Old   Partner\u2019s Capital\/ Current A\/cs&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;    Dr.   &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br \/>                To Revaluation A\/c   <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p class=\"has-background has-luminous-vivid-amber-background-color\"><strong>WHEN THERE IS AN INCREASE IN MARKET VALUE OF INVESTMENT<\/strong><\/p>\n\n\n\n<p>In such a situation, entire Investment Fluctuation\nReserve is distributed o old partners in their old profit-sharing ratio and\nincrease in value is credited to Revaluation Account. Gain on such revaluation\nis transferred to Old partner\u2019s Capital accounts in old profit sharing ratio.\nThe journal entries passed are:<\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>Investment   Fluctuation Reserve A\/c&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Dr.   &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br \/>          To Old Partner\u2019s Capital A\/cs   <br \/>Investment   A\/c &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;     &nbsp; Dr.   &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br \/>          To Revaluation A\/c   <br \/>Revaluation   A\/c&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;      Dr.   &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br \/>          To Old Partner\u2019s Capital\/ Current   A\/cs   <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p class=\"has-background has-very-light-gray-background-color\"><strong>EXAMPLE: <\/strong>A, B and C are sharing profits in the ratio of 4:3:2, decide to admit D as a new partner with effect from 1<sup>st<\/sup> April, 2018 An extract of their Balance Sheet shows the Investment Fluctuation reserve at \u20b918,000 and the Investment (at cost) is \u20b92,00,000. Show the Journal entries in following cases:<\/p>\n\n\n\n<p class=\"has-background has-very-light-gray-background-color\">Case 1: If there is no other information<\/p>\n\n\n\n<p class=\"has-background has-very-light-gray-background-color\">Case 2: If the market value of investment is\n2,00,000<\/p>\n\n\n\n<p class=\"has-background has-very-light-gray-background-color\">Case 3: If the market value of investment is \u20b91,91,000<\/p>\n\n\n\n<p class=\"has-background has-very-light-gray-background-color\">Case 4: If the market value of investment is \u20b91,73,000<\/p>\n\n\n\n<p class=\"has-background has-very-light-gray-background-color\">Case 5: If the market value of investment is \u20b92,18,000<\/p>\n\n\n\n<p><strong>CASE 1: SOLUTION:<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"704\" height=\"225\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/case-1-2.png\" alt=\"\" class=\"wp-image-1470\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/case-1-2.png 704w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/case-1-2-300x96.png 300w\" sizes=\"(max-width: 704px) 100vw, 704px\" \/><\/figure>\n\n\n\n<p><strong>CASE 2: SOLUTION:<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"704\" height=\"225\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/case-1-2-1.png\" alt=\"\" class=\"wp-image-1471\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/case-1-2-1.png 704w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/case-1-2-1-300x96.png 300w\" sizes=\"(max-width: 704px) 100vw, 704px\" \/><\/figure>\n\n\n\n<p><strong>CASE 3: SOLUTION:<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"721\" height=\"263\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/case-3.png\" alt=\"\" class=\"wp-image-1472\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/case-3.png 721w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/case-3-300x109.png 300w\" sizes=\"(max-width: 721px) 100vw, 721px\" \/><\/figure>\n\n\n\n<p><strong>CASE 4: SOLUTION:<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"703\" height=\"295\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/case-4.png\" alt=\"\" class=\"wp-image-1473\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/case-4.png 703w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/case-4-300x126.png 300w\" sizes=\"(max-width: 703px) 100vw, 703px\" \/><\/figure>\n\n\n\n<p><strong>CASE 5: SOLUTION:<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"693\" height=\"441\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/case-5.png\" alt=\"\" class=\"wp-image-1474\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/case-5.png 693w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/case-5-300x191.png 300w\" sizes=\"(max-width: 693px) 100vw, 693px\" \/><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>INVESTMENT FLUCTUATION RESERVE Investment Fluctuation Reserve is a reserve created out of the profits to meet the fall in the market value of investments. It is created to adjust the difference between the book value and market value of investment. Excess of IFR over difference between book value and market value is credited to old&#8230;<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/investment-fluctuation-reserve\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;INVESTMENT FLUCTUATION RESERVE&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":1489,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19,21],"tags":[],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/1468"}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=1468"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/1468\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/1489"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=1468"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=1468"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=1468"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}