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 Rs. $1,20,000$ at the time of change in profit-sharing ratio, when there is a claim of Rs. $80,000$ against it.

Answer 1

Workmen Compensation Reserve A/c.......Dr. 40000

To X's Capital A/c 20000

To Y's Capital A/c 12000

To Z's Capital A/c 8000

(Being the excess after the claim against the workmen compensation reserve distributed in the old ratio)