Question

A, B and Care partners in a firm sharing profits in the ratio of 3 : 4 : 1. They decided to share profits equally w.e.f. 1st April, 2024. On that date Workmen Compensation Reserve showed a balance of ₹ 2,70,000 and there was a claim of ₹ 1,50,000 against it.

In the adjustment entry:

Options

• Cr. A by ₹ 5,000; Cr. B by ₹ 20,000; Dr. C by ₹ 25,000

• Dr. A by ₹ 5,000; Dr. B by ₹ 20,000; Cr. C by ₹ 25,000

• Cr. A by ₹ 40,000; Cr. B by ₹ 40,000; Cr. C by ₹ 40,000

• Cr. A by ₹ 45,000; Cr. B by ₹ 60,000; Cr. C by ₹ 15,000

Answer 1

Cr. A by ₹ 45,000; Cr. B by ₹ 60,000; Cr. C by ₹ 15,000

Explanation:

Excess Workmen Compensation Reserve i.e., ₹ 2,70,000 (−) ₹ 1,50,000 = ₹ 21,20,000 will be Credited to A, B and C in their old profit sharing ratio.