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Bat, Cat and Rat… (Class 12 Accountancy SQP 2024-25, Q20)

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AccountancyCBSE Class 12 · Sample paper, session 2024-25 · 3 marks · Short answer

CBSE Class 12 Accountancy sample paper 2024-25: question 20

From the official CBSE sample question paper for 2024-25, section A, question 20, for 3 marks. Try it first; the hints and our step-by-step solution are below.

Q20 · 3 marks · Short answerReconstitution of a Partnership Firm – Retirement/Death of a Partner

Bat, Cat and Rat were partners sharing profits and losses in the ratio 5:3:2. Cat retired and on that date there was a balance of Investment of ₹ 4,00,000 and Investment Fluctuation Reserve of ₹ 1,00,000 was appearing in the balance sheet.
Pass necessary journal entries for Investment Fluctuation reserve in the following cases.
(i) Market Value of Investments was ₹ 4,80,000.
(ii) Market Value of Investments was ₹ 3,80,000.
(iii) Market Value of Investments was ₹ 2,90,000

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2024-25.

Hints

Open one hint at a time and try again before the next.

Hint 1

Compare market value with book value of ₹ 4,00,000 in each case.

Hint 2

The reserve first meets any fall; what is left goes to partners 5 : 3 : 2.

Hint 3

A fall bigger than the reserve is a revaluation loss.

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. (i) Market value ₹ 4,80,000 (rise ₹ 80,000): the whole reserve goes to partners 5 : 3 : 2 and the rise is a revaluation gain.

    ParticularsDr. (₹)Cr. (₹)
    Investment Fluctuation Reserve A/c Dr.1,00,000
    To Bat's Capital A/c50,000
    To Cat's Capital A/c30,000
    To Rat's Capital A/c20,000
    (Being reserve distributed in old ratio)
    Investment A/c Dr.80,000
    To Revaluation A/c80,000
    (Being increase in value of investments)
    Revaluation A/c Dr.80,000
    To Bat's Capital A/c40,000
    To Cat's Capital A/c24,000
    To Rat's Capital A/c16,000
    (Being revaluation gain transferred to partners)
    1 mark

  2. (ii) Market value ₹ 3,80,000 (fall ₹ 20,000): the reserve meets the fall and ₹ 80,000 is left for partners.

    ParticularsDr. (₹)Cr. (₹)
    Investment Fluctuation Reserve A/c Dr.1,00,000
    To Investment A/c20,000
    To Bat's Capital A/c40,000
    To Cat's Capital A/c24,000
    To Rat's Capital A/c16,000
    (Being fall in investments met and balance of reserve distributed)
    1 mark

  3. (iii) Market value ₹ 2,90,000 (fall ₹ 1,10,000): the reserve covers ₹ 1,00,000; the extra ₹ 10,000 is a revaluation loss.

    ParticularsDr. (₹)Cr. (₹)
    Investment Fluctuation Reserve A/c Dr.1,00,000
    Revaluation A/c Dr.10,000
    To Investment A/c1,10,000
    (Being fall in value of investments)
    Bat's Capital A/c Dr.5,000
    Cat's Capital A/c Dr.3,000
    Rat's Capital A/c Dr.2,000
    To Revaluation A/c10,000
    (Being revaluation loss shared in old ratio)
    1 mark

Answer: (i) IFR ₹ 1,00,000 to partners ₹ 50,000/30,000/20,000; gain ₹ 80,000 to partners ₹ 40,000/24,000/16,000. (ii) IFR ₹ 1,00,000 to Investment ₹ 20,000 and partners ₹ 40,000/24,000/16,000. (iii) IFR ₹ 1,00,000 and Revaluation ₹ 10,000 to Investment ₹ 1,10,000; loss ₹ 5,000/3,000/2,000

Where the marks are

  • Case (i) (1 mark)
  • Case (ii) (1 mark)
  • Case (iii) (1 mark)

Revise the chapter

Practise this chapterBoard-style questions from Reconstitution of a Partnership Firm – Retirement/Death of a Partner, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2024-25: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.