Question

Manu, Sonu, and Rahul were partners in a firm sharing profits and losses in the ratio of \( 4 : 3 : 2 \). With effect from 1\textsuperscript{st April, 2023, they decided to share profits and losses in the future in the ratio of \( 3 : 2 : 1 \). Their Balance Sheet showed Workmen Compensation Reserve of ₹ 84,000. The claim on account of Workmen Compensation is estimated at ₹ 75,000. The journal entry to give effect to the above transaction will be:} \includegraphics[width=0.5\linewidth]{Screenshot 2025-01-17 200658.jpg} \label{fig:enter-label} \end{figure}

Hint:

Any balance remaining in the Workmen Compensation Reserve after meeting claims is distributed among the partners in their old profit-sharing ratio.

Answer 1

1. Distribution of Workmen Compensation Reserve: The Workmen Compensation Reserve is first distributed among the partners in their old profit-sharing ratio \( 4 : 3 : 2 \): \[ \text{Manu's share} = \frac{4}{9} \times ₹ 84,000 = ₹ 37,333.33 \] \[ \text{Sonu's share} = \frac{3}{9} \times ₹ 84,000 = ₹ 28,000 \] \[ \text{Rahul's share} = \frac{2}{9} \times ₹ 84,000 = ₹ 18,667 \] 2. Adjustment for Workmen Compensation Claim: A claim of ₹ 75,000 is adjusted against the reserve, leaving ₹ 9,000 (₹ 84,000 - ₹ 75,000) to be distributed in the old ratio. Journal Entry: \begin{table}[h!] \centering \renewcommand{\arraystretch}{1.5} \begin{tabular}{|l|c|c|} \hline Particulars & Dr Amount (₹) & Cr Amount (₹)
\hline Workmen Compensation Reserve A/c Dr & 84,000 &
To Workmen Compensation Claim A/c & & 75,000
To Manu’s Capital A/c & & 4,000
To Sonu’s Capital A/c & & 3,000
To Rahul’s Capital A/c & & 2,000
\hline \end{tabular} \caption{Journal Entry for Adjustment of Workmen Compensation Reserve} \end{table} \vspace{0.3cm}