When a firm is dissolved, the Balance of Investment Account and Balance of Investment Fluctuation Fund Account, shown by Firm's Balance Sheet are transferred in ................ and into ................... respectively:-
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Debit Side of Realisation Account, Credit side of Realisation Account
When a firm is dissolved, all assets and liabilities are transferred to the Realisation Account to determine profit or loss on realisation.
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Investment Account (Asset):
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Assets are transferred to the debit side of the Realisation Account.
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But since the question asks where the balance of Investment Account is transferred in, the correct part of the pair is the debit side of Realisation Account.
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Investment Fluctuation Fund (Reserve):
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It is a liability or reserve created to meet fall in value of investments.
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Hence, it is credited when created, and on dissolution, this fund is transferred to the credit side of Realisation Account to close it, since it is not payable to any creditor.
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