Kavita Savita and Ritika Are partners sharing profits and losses equally. Savita retired from the firm on which the investments existing in the books were 110000 and had market value at 100000. It also had investment fluctuation Reserve of 70000. How much amount will be credited to savita's Capital account ?

Dear Student

Decrease in investment= Book value - Market Value
                                     = Rs 1,10,000 - 1,00,000
                                     = Rs. 10,000

,Amount to be credited  to savita's Capital account=  10,000 * 1/3
                                                                                = Rs. 3,333


Note :Payment of Investment Fluctuation Fund is not made because it is not a claimed by the outsiders. It is treated as Provision for Doubtful Debts at the time of dissolution of the firm. It is neither paid like provident fund and creditors nor distributed as General Reserve among the partners because it a specific reserve which is available only to compensate loss in the value of investments. 



Regards

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