Question

Akhil, Viren and Sarla are partners in a firm who share profits in 4 : 3 : 3 ratio. On the date of Sarla’s retirement from the firm, the books show the workmen compensation reserve of ₹ 12,000.

Akhil and Viren decide to share profit in equal ratio after Sarla’s retirement.

Choose the correct journal for the treatment of workmen compensation reserve if the continuing partners decide to show workmen compensation reserve in the reconstituted balance sheet.

पर्याय

• Debit workmen compensation reserve A/c ₹ 12,000; Credit Akhil’s Capital A/c ₹ 4,800; Credit Viren’s Capital A/c ₹ 3,600 and Sarla’s Capital A/c ₹ 3,600

• Debit workmen compensation reserve A/c ₹ 3,600 and Credit Sarla’s Capital A/c ₹ 3,600.

• Debit Sarla’s Capital A/c ₹ 3,600; Credit Akhil’s Capital A/c ₹ 1,200 and Credit Viren’s Capital A/c ₹ 2,400.

• Debit Akhil’s Capital A/c ₹ 1,200; Debit Viren’s Capital A/c ₹ 2,400 and Credit Sarla’s Capital A/c ₹ 3,600.

Answer 1

Debit Akhil’s Capital A/c ₹ 1,200; Debit Viren’s Capital A/c ₹ 2,400 and Credit Sarla’s Capital A/c ₹ 3,600.

Explanation:

i. Calculate Gaining and Sacrificing Ratios:

The old profit sharing ratio (Akhil : Viren : Sarla) is 4 : 3 : 3, and the new ratio (Akhil : Viren) is 1 : 1.

Akhil’s gain = `1/2 - 4/10 = 1/10`

Viren’s gain = `1/2 - 3/10 = 2/10`

Sarla’s sacrifice = `3/10`

The gaining ratio of Akhil and Viren is 1:2.

ii. Determine Adjustment Amounts: 

The total reserve amount is ₹ 12,000. The gaining partner’s account is debited, and the sacrificing partner’s account is credited.

Akhil’s Debit = `12,000 xx 1/10` = 1,200

Viren’s Debit = `12,000 xx 2/10` = 2,400

Sarla’s Credit = `12,000 xx 3/10` = 3,600