Question

Ajay and Bijoy are two partners sharing profits and losses in the ratio of 2:1.

Balance Sheet of Ajay and Bijoy (extract) As at 31st March 2024
Liabilities	(₹)	Assets	(₹)
Workmen Compensation Reserve	1,200

Additional information:

1. On 1st April 2024, they admitted Sujay as a partner with ½ share in the profits.
2. The Workmen Compensation Reserve to be reduced to ₹ 900 in the reconstituted firm.

You are required to give the accounting treatment of Workmen Compensation Reserve on the date of Sujay’s admission.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	Workmen Compensation Reserve A/c     ...Dr.		300
	To Ajay’s Capital A/c			200
	To Bijoy’s Capital A/c			100
	(Being WCR ₹ 300 transferred to old partner’s Capital A/c)
	Sujoy’s Capital A/c     ...Dr.		225
	To Ajay’s Capital A/c			150
	To Bijoy’s Capital A/c			75
	(Being adjustment of accumulated profit on admission of Sujoy)

Working Note:

Share of Profit of Sujoy = `1/4` So, `1/4` of ₹ 900 to be debited to Sujoy’s capital and to be credited to Ajay and Bijoy’s Capital A/c in their sacrificing ratio i.e., 2:1.