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.

Answer 1

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)