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Question

X,Y and Z who are 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 with effect from 1st April, 2018 . Workmen Compensation Reserve appears at Rs. 1,20,000 in the Balance Sheet as on 31st March, 2018 and Workmen Compensation Claim is estimated at Rs. 1,50,000 Pass Journal entries for the accounting treatment of Workmen Compensation Reserve.

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Solution

Workmen compensation reserve A/c............Dr. 120000
To X's Capital A/c 60000
To Y's Capital A/c 36000
To Z's Capital A/c 24000
(Being reserve distributed in old ratio)

X's Capital A/c 30000
Y's Capital A/c 45000
Z's Capital A/c 75000
To Workmen compensation reserve a/c 150000
(Being reserve raised in the new ratio)

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