Question

Q14.In case of Workmen Compensation Reserve, if the amount claimed is more than the amount

lying in WCR, then the shortfall will be recorded: (1)

(a) Revaluation Account (c) Partners’ Capital Account

(b)Balance sheet (d) None of these
​

Answer 1

Answer:

In case of Workmen Compensation Reserve, if the amount claimed is more than the amount , the shortfall will be recorded:

 (c) Partners’ Capital Account

Explanation:

The Workmen Compensation Reserve is a fund established using profit to support the needs of workers or employees. To cover unforeseen circumstances, a certain sum is set up in the reserve in the name of the employees.

This reserve may or may not be subject to claim. Situations involving the Workmen Compensation Reserve claim have different accounting treatment.

The Workmen Compensation Reserve is divided among the partners in accordance with the previous profit sharing ratio during a change in profit sharing ratio or reconstitution of the firm as a result of an alteration in profit sharing ratio among the existing partners, admission, retirement, death of a partner, or dissolution of the partnership.

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Answer 2

(c) Partners’ Capital Account

• The capital investment which is original, interest that has been received on capital, all withdrawals, sharing of profits, as well as other financial transactions between the partners and the firm concerned with the partnership, are all recorded in the partnership capital account. There must be sufficient amount of accountability and transparency between the partners and the members of the firm.
• However, in a partnership that is not a liability partnership that is limited, the capital account is devoid of any meaning because the partners must pay from their personal estate if the assets are lesser than the liabilities. Also, the capital account cannot be utilized to limit this liability.

Hence, the Partner's Capital Account is where the amount claimed that has been more than the amount, goes, in case of Workmen Compensation Reserve.

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