Question

In a partnership firm, 'Workmen compensation reserve' appears in the Balance Sheet of rupees 70000 at the time of retirement of Niti.  When there is a claim of rupees 25000 against it.   The firm has three partners Ravina,  Niti and Rajat.   What amount to be credited  toNiti as  Workmen Compensation   Reserve?

            (A)Rs. 25,000                                       (B)Rs. 23,333

            (C)Rs. 8,333                                         (D)None of these  ​

Answer 1

Answer:

profit sharing ratio is not given we assume it equal

reserve 70000-25000= 45000

Niti share = 45000×1/3 =15000

D option

Answer 2

Given:

The firm has three partners.

Work compensation reserve in the balance sheet = Rs.70000

Claim = Rs 25000

To Find:

We have to find the amount to be credited to Niti as WCR.

Solution:

• The balance of workmen compensation reserves is treated as free reserves and are distributed among the existing partners in the old profit sharing ratio.
• When the liability of workmen compensation can be foreseen it can reasonably be estimated at the time of reconstitution of the firm.
• The estimated value of the liability is less than the balance of workmen compensation reserves shown in the Balance Sheet., then the first step is to create the liability of workmen compensation at the estimated value by crediting that for workmen compensation and is adjusting it from the reserve by debiting the Workmen compensation reserves.

Since the profit-sharing ratio is not given, it is distributed equally.

Reserve = 75000-25000 = 45000

The amount credited to Niti's A/c = $\frac{45000}{3}$ = Rs.15000

As shown in the tabular form, the amount credited to Niti's A/c is Rs.15000.

∴ Option D is correct. (None of these) .