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The Workmen Compensation Reserve is ₹70,000 and the claim against it is ₹30,000. What amount will be distributed among the old partners?

Answer and explanation

Correct answer: ₹40,000

The claim is first adjusted against the Workmen Compensation Reserve. The balance is distributed to the old partners through their capital or current accounts in their old profit-sharing ratio: ₹70,000 − ₹30,000 = ₹40,000. Exam tip: Deduct the related liability from the reserve before distributing the surplus.

Related tags

Workmen Compensation ReserveAdmission Of PartnerReserve AdjustmentOld PartnersClaimReservesReconstitution Admission Of A PartnerAccountancy

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