Question

Nandini, Shweta and Hiren were partners in a firm sharing profits and losses in the ratio of $9:7:4$. On 1$^{\text{st}}$ April, 2025, Shweta retired. On the date of Shweta’s retirement, there existed a balance of ₹ 1,00,000 in Workmen’s Compensation Fund. Pass necessary journal entries for treatment of Workmen’s Compensation Fund on Shweta’s retirement in each of the following cases:

• [(i)] Claim on account of Workmen’s Compensation was estimated at ₹ 1,20,000.
• [(ii)] Claim on account of Workmen’s Compensation was estimated at ₹ 80,000.
• [(iii)] Claim on account of Workmen’s Compensation was estimated at ₹ 1,00,000.

Hint:

Workmen’s Compensation Fund:

• Claim>Fund → deficiency = loss (old ratio)
• Claim& Lt;Fund → surplus = gain (old ratio)
• Claim = Fund → no adjustment

Answer 1

Old ratio = $9:7:4$ (Total = 20) (i) Claim = ₹ 1,20,000 (More than fund) Fund available = ₹ 1,00,000 Deficiency = ₹ 20,000 Loss shared in old ratio. \[ \text{Nandini} = 20,000 \times \frac{9}{20} = 9,000 \] \[ \text{Shweta} = 20,000 \times \frac{7}{20} = 7,000 \] \[ \text{Hiren} = 20,000 \times \frac{4}{20} = 4,000 \] Entries: \[ \text{Workmen’s Compensation Fund A/c Dr. 1,00,000} \] \[ \text{Revaluation A/c Dr. 20,000} \] \[ \text{To Workmen’s Compensation Liability A/c 1,20,000} \] \[ \text{Nandini’s Capital A/c Dr. 9,000} \] \[ \text{Shweta’s Capital A/c Dr. 7,000} \] \[ \text{Hiren’s Capital A/c Dr. 4,000} \] \[ \text{To Revaluation A/c 20,000} \] (ii) Claim = ₹ 80,000 (Less than fund) Surplus = ₹ 20,000 Distributed in old ratio. \[ \text{Nandini} = 9,000, \quad \text{Shweta} = 7,000, \quad \text{Hiren} = 4,000 \] Entries: \[ \text{Workmen’s Compensation Fund A/c Dr. 1,00,000} \] \[ \text{To Workmen’s Compensation Liability A/c 80,000} \] \[ \text{To Revaluation A/c 20,000} \] \[ \text{Revaluation A/c Dr. 20,000} \] \[ \text{To Nandini’s Capital A/c 9,000} \] \[ \text{To Shweta’s Capital A/c 7,000} \] \[ \text{To Hiren’s Capital A/c 4,000} \] (iii) Claim = ₹ 1,00,000 (Equal to fund) No profit or loss. Entry: \[ \text{Workmen’s Compensation Fund A/c Dr. 1,00,000} \] \[ \text{To Workmen’s Compensation Liability A/c 1,00,000} \]