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. Give the journal entry to distribute 'Workmen Compensation Reserve' of ₹ 1,20,000 at the time of change in profit-sharing ratio, when there is a claim of ₹ 80,000 against it.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Workmen Compensation Reserve A/c	Dr.		1,20,000
	To X’s Capital A/c				20,000
	To Y’s Capital A/c				12,000
	To Z’s Capital A/c				8,000
	To Workmen Compensation Claim A/c				80,000
	(Adjustment of balance in Workmen Compensation Reserve A/c in old ratio)

Working Notes:

WN1 Calculation of Share of Workmen Compensation Reserve
$$\begin{gathered} \mathrm{X}\text{'}\mathrm{s}\mathrm{share}=40,000\times \frac{5}{10}=20,000 \\ \mathrm{Y}\text{'}\mathrm{s}\mathrm{share}=40,000\times \frac{3}{10}=12,000 \\ \mathrm{Z}\text{'}\mathrm{s}\mathrm{share}=40,000\times \frac{2}{10}=8,000 \end{gathered}$$