Question

A, B and C 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:
(i) no information is given; (ii) there is no claim against it.

Answer 1

(i) & (ii)

Journal

Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Workmen Compensation Reserve A/c	Dr.		1,20,000
	To A’s Capital A/c				60,000
	To B’s Capital A/c				36,000
	To C’s Capital A/c				24,000
	(Workmen Compensation Reserve distributed)

Note:

In the both the cases, Workmen Compensation Reserve should be distributed in old ratio i.e., 5:3:2.