Question

A, B and C are partners sharing profits and losses in the ratio of 2:2:1. They admitted D for $\frac{1}{4}th$ share with effect from 1st April, 2017. An extract of their Balance Sheet as at 31st March, 2017 is as follows:

$\begin{array}{cccc}\text{Capital and Liabilities}& \text{Rs}& \text{Assets}& \text{Rs}\\ \text{Workmen Compensation Reserve}& 80,000& & \end{array}$

Show the accounting treatment under the following alternative cases:

Case 1. If then is no other information.

Case 2. If a claim for workmen compensation is estimated at Rs 50,000.

Case 3. If a claim for workmen compensation is estimated at Rs 80,000.

Case 4. If a claim for workmen compensation is estimated at Rs 1,00,000.

Answer 1

JOURNAL

$\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F.}& \text{Dr.Rs}& \text{Cr (Rs)}\\ 2017& & & & \\ \text{April 1}& & & & \\ \text{Case 1}& \text{Workmen Compensation Reserve A/c}Dr.& & 80,000& \\ & \text{To A's Capital A/c}& & & 32,000\\ & \text{To B's Capital A/c}& & & 32,000\\ & \text{To C's Capital A/c}& & & 16,000\\ & \text{(Workmen Compensation Reserve credited to old}& & & \\ & \text{partner's capital accounts in their old profit-sharing}& & & \\ & \text{ratio)}& & & \\ & \underset{–}{}& & & \\ \text{Case 2}& \text{Workmen Compensation Reserve A/c}Dr.& & 80,000& \\ & \text{To Provision for Workmen Compensation Claim A/c}& & & 50,000\\ & \text{To A's Capital A/c}& & & 12,000\\ & \text{To B's Capital A/c}& & & 12,000\\ & \text{To C's Capital A/c}& & & 6,000\\ & \text{(Surplus workmen compensation reserve credited to}& & & \\ & \text{old partner's capital accounts in their old profit-}& & & \\ & \text{sharing ratio)}& & & \\ & \underset{–}{}& & & \\ \text{Case 3}& \text{Workmen Compensation Reserve A/c}Dr.& & 80,000& \\ & \text{To Provision for Workmen Compensation Claim A/c}& & & 80,000\\ & \text{(Provision made for workmen compensation claim)}& & & \\ & \underset{–}{}& & & \\ \text{Case 4}& \text{Workmen Comensation Reserve A/c}Dr.& & 80,000& \\ & \text{Revaluation A/c}Dr.& & 20,000& \\ & \text{To Provision for Workmen Compensation Claim A/c}& & & 1,00,000\\ & \text{(Provision made for workmen claim and shortfall}& & & \\ & \text{charged to revaluation account)}& & & \\ & \underset{–}{}& & & \\ & \text{A's Capital A/c}Dr.& & 8,000& \\ & \text{B's Capital A/c}Dr.& & 8,000& \\ & \text{C's Capital A/c}Dr.& & 4,000& \\ & \text{To Revaluation A/c}& & & 20,000\\ & \text{(Loss on revaluation debited to partners' capital}& & & \\ & \text{accounts in their old profit-sharing ratio)}& & & \end{array}$