Question

X, Y and Z who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in the ratio of 2 : 3 : 5 . with effect from 1st April, 2018. Workmen Compensation Reserve appears at ₹ 1,20,000 in the Balance Sheet as at 31st March, 2018 and Workmen Compensation Claim is estimated at ₹ 1,50,000. Pass journal entries for the accounting treatment of Workmen Compensation Reserve.

Answer 1

Solution:

                                                 Journal  

Sr. No.              Particulars                                  Debit Its.         Credit Rs.

(i)      Workmen Compensation Reserve A/c Dr.  1,20,000

        Revaluation A/c                                      Dr.   30,000

           To Provision for W.C. Claim A/c                                      1,50,000

(Being provision created and shortfall charged to Revaluation account)

(ii)           X's Capital A/c                              Dr.     15,000

             Y's Capital A/c                               Dr.      9,000

            Z's Capital A/c                                Dr.       6,000

                 To Revaluation A/c                                                    30,000

(Being loss on revaluation transferred to Partner's Capital account)