Step 1: Understanding the Concept:
Investment Fluctuation Reserve (IFR) is an accumulated profit set aside to cover potential losses in the value of investments. Step 2: Detailed Explanation:
When a partnership is reconstituted (due to death, retirement, or change in PSR), all accumulated reserves must be adjusted.
First, the decrease in the value of the investment is adjusted against the IFR.
Any surplus/balance remaining in the IFR is a part of accumulated profits.
This remaining balance must be distributed among all partners (including the deceased partner) in their old profit-sharing ratio.
The accounting entry is:
\[ \text{Investment Fluctuation Reserve A/c Dr.} \]
\[ \text{To All Partners' Capital A/cs} \]
This results in the amount being credited to the capital accounts. Step 3: Final Answer:
The balance is credited to All Partner's Capital Accounts.