Question

L, T and D are partners in a firm sharing Profits and Losses in the ratio of 4 : 3 : 2. Balance Sheet of the firm as on 31st March, 2026 was as follows:

BALANCE SHEET
Liabilities	₹	₹	Assets	₹	₹
Capital A/cs:		4,57,000	Goodwill		70,000
L	2,68,000		Building		82,000
T	1,89,000		Machinery		1,10,000
T’s Loan		40,000	Prepaid Insurance		25,000
Workmen Compensation Reserve		63,000	Furniture		45,000
Sundry Creditors		83,000	Sundry Debtors	1,20,000	1,02,000
Bills Payable		37,000	Less: Provision	18,000
			Stock		40,000
			Bank		15,000
			Profit & Loss A/c		72,000
			Capital A/c: D		1,19,000
		6,80,000			6,80,000

On 1st April, 2026, they decided to dissolve their partnership, as it cannot be carried on except at a loss and following terms and conditions were agreed upon:

1. Half of the Stock expired and sold at 20% Discount and T took over remaining stock at half the price.
2. Bad Debts were ₹ 25,000 and Debtors realised at a Discount of 20%.
3. Sundry Creditors accepted Machinery at Book Value and paid the balance.
4. Building realised ₹ 1,40,000.
5. L took goodwill of the firm at a value of ₹ 54,000.
6. Realisation expenses were ₹ 17,200 met by D and liability for Workmen Compensation was ₹ 45,000.

A. How is Workmen Compensation Reserve treated in this situation?

1. Workmen Compensation Reserve (₹ 63,000) is distributed among the partners in their profit-sharing ratio.
2. Workmen Compensation Reserve (₹ 63,000) is distributed among the partners in their profit-sharing ratio and liability for Workmen Compensation (₹ 45,000) is transferred (credited) to Realisation Account.
3. Amount equal to liability (₹ 45,000) is transferred (credited) to Realisation Account and the balance amount of Workmen Compensation Reserve (₹ 18,000) is transferred (credited) to Capital Accounts of partners in their profit-sharing ratio.
4. Total amount of Workmen Compensation Reserve (₹ 63,000) is transferred (credited) to Realisation Account.

B. Debtors Realised

1. ₹ 76,000
2. ₹ 33,500
3. ₹ 96,000
4. ₹ 72,700

C. Assets Realised

1. ₹ 2,30,000
2. ₹ 3,04,000
3. ₹ 2,57,900
4. ₹ 2,62,700

D. Total amount paid to outside parties by the firm is

1. ₹ 1,65,000
2. ₹ 83,500
3. ₹ 1,62,700
4. ₹ 82,000

Answer 1

A. Total amount of Workmen Compensation Reserve (₹ 63,000) is transferred (credited) to Realisation Account.

B. ₹ 76,000

C. ₹ 3,04,000

D. ₹ 82,000