Question

A, B, C and D are partners sharing profits in the ratio of 4 : 3 : 2 : 1. A retired on 1st May, 2025 and B, C and D decided to share future profits and losses equally. On this date their books show ‘Workmen Compensation Reserve’ of ₹ 1,20,000. Continuing partners do not want to alter the value of any item of Balance Sheet and want to record the effect of retirement by passing an adjustment entry. You are required to pass the adjustment entry under following alternative cases:

1. When there is no claim for workmen compensation.
2. When claim for workmen compensation is estimated at ₹ 30,000.
3. When claim for workmen compensation is estimated at ₹ 1,20,000.
4. When claim for workmen compensation is estimated at ₹ 1,80,000.

Answer 1

Journal
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
Case 1	B’s Capital A/c        ...Dr.		4,000
	C’s Capital A/c       ...Dr.		16,000
	D’s Capital A/c       ...Dr.		28,000
	To A’s Capital A/c			48,000
	(Adjustment for A’s share of workmen Compensation reserve in gaining ratio of 3 : 2 : 1)
Case 2	B’s Capital A/c        ...Dr.		3,000
	C’s Capital A/c       ...Dr.		12,000
	D’s Capital A/c       ...Dr.		21,000
	To A’s Capital A/c			36,000
	(Adjustment for A’s share of workmen compensation reserve of ₹ 1,20,000 less claim ₹ 30,000 in gaining ratio of 3 : 2 : 1)
Case 3	No Entry
Case 4	A’s Capital A/c     ...Dr.		24,000
	To B’s Capital A/c			2,000
	To C’s Capital A/c			8,000
	To D’s Capital A/c			14,000
	(Adjustment for C’s share of workmen compensation claim ₹ 1,80,000 less reserve ₹ 1,20,000)