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 distributed among the partners in the old profit-sharing ratio (4 : 3 : 2).

Manu’s share = \( \frac{4}{9} \times 84,000 = ₹37,333.33 \)
Sonu’s share = \( \frac{3}{9} \times 84,000 = ₹28,000 \)
Rahul’s share = \( \frac{2}{9} \times 84,000 = ₹18,667 \)

2. Adjustment for Workmen Compensation Claim:
A claim of ₹75,000 is settled out of the reserve. The remaining balance of ₹9,000 (₹84,000 − ₹75,000) is distributed among partners in the old ratio.

Journal Entry:

Particulars	Dr Amount (₹)	Cr Amount (₹)
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

Journal Entry for adjustment of Workmen Compensation Reserve