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Question

A, B and C 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 . Give the journal entry to distribute ' Workmen Compensation Reserve' of ₹ 1,20,000 at the time of change in profit-sharing ratio, when:
(i) no information is given (ii) there is no claim against it.

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Solution

(i) & (ii)

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

Workmen Compensation Reserve A/c

Dr.

1,20,000

To A’s Capital A/c

60,000

To B’s Capital A/c

36,000

To C’s Capital A/c

24,000

(Workmen Compensation Reserve distributed)

Note:

In the both the cases, Workmen Compensation Reserve should be distributed in old ratio i.e., 5:3:2.


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