Question

At the time of admission of a partner, the Balance Sheet of the firm showed a workmen compensation reserve of \rupee 80,000. The claim for workmen compensation was estimated at \rupee 1,00,000. The shortfall of \rupee 20,000 will be:

• A. debited to Revaluation Account
• B. credited to Revaluation Account
• C. debited to Partners' Capital Accounts
• D. credited to Partners' Capital Accounts

Hint:

Adjust liabilities exceeding reserves through the Revaluation Account during admission, retirement, or disSolution of a partner.

Answer 1

The Correct Option is A

The workmen compensation reserve of \rupee 80,000 is insufficient to cover the claim of \rupee 1,00,000. The shortfall of \rupee 20,000 will be debited to the Revaluation Account, as it represents a liability adjustment.