Comprehension:Read the financial details from the preceding text carefully.At the time of dissolution, how will the Investment Fluctuation Reserve balance appearing in the liabilities side of the Balance Sheet be treated?
- ATransferred to the debit side of the Realisation Account
- BTransferred to the credit side of the Realisation Account
- CDistributed amongst partners directly in their profit-sharing ratio
- DSubtracted from the value of the Investment Asset in the Balance Sheet
Solution & Step-by-step Explanation
In partnership dissolution accounting, when the corresponding asset (Investments) is transferred to the Realisation Account, any related provision or reserve created against it, such as the Investment Fluctuation Reserve, must also be closed by transferring it to the Credit side of the Realisation Account. It is not distributed directly to partner capital accounts if the underlying asset is transferred to Realisation.