Treatment of investment fluctuation fund at the time of dissolution of firm??

Dear Student,
Investment Fluctuation Fund Investment Fluctuation Fund is made to face the loss due to decrease in value of Investment Balance Sheet (Old) Treatment of Investment Fluctuation Fund.
​​​​​Assume that the value of investments in balance sheet is Rs 30,000. And the value of investment fluctuation reserve Rs 21,000 in liabilities in balance sheet. Then following are the cases-

Case 1-Market value of Investment Is `27,000 .There is loss ` 3,000 for which we will use fund. Remaining fund (21000 – 3000 =18000) is distributed among old partners in old ratio.
Investment Fluctuation Fund A/c Dr  
To Investment A/c (loss in value of investments)
To Partners Capital a/c (in profit sharing ratio)

Case 2-Market value of Investment Is ` 32,000. No need to use this fund. Distribute whole fund of ` 21,000 among old partner in old ratio.

Case 3-Market value of Investment Is ` 30,000. No need to use This fund distribute whole fund of ` 21,000 among old partner in profit sharing ratio.  
Hope this information will clear your doubts about topic.

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Regards

  • -8
It is written in credit side of realisation a/c and nothing is done to it after this
  • 16
Thank you but not satisfied by ur answer :-(
  • -10
Investment Fluctuation Fund is written in credit side of the Realisation Account when there is some investment in your balance sheet before dissolution. When there is no investments then it is simple transferred to partners' capital Account.
Now you will think that why investment fluctuation is written in Realisation Account but not General Reserve or Workmen Compensation Reserve or credit balance of profit and loss account etc. 
Answer is very simple.
Realisation Account is prepared at the time of dissolution when assets are not yet sold and liabilities are not yet paid. Can you determine the actual price before sale at which the investments will be sold? Since we can't determine the actual loss or profit we will ascertain after the sale of investments, so we take the whole of investment fluctuation reserve to the realisation account.
I hope you are clear now.
  • 74
Thank you :-) ur answer cleared my doubt..!!
  • 10
Hi bhavika this is easy ifr will be in cr side of revaluation and no effect to this will be done except revaluation
  • 7
Investment fluctuation reserve(IFR) has two kinds of treatment.
1. when value of investment is given in the balance sheet of the firm then it will be transferred to REALISATION account.
2. When the value of IFR is not given in the balance sheet then it will be transferred to PARTNER CAPITAL ACCOUNT.
  • 7
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