Question
A, B and C who are presently sharing profits and losses in the ratio of 5 : 3 : 2 decide to share future profits and losses in the ratio of 2 : 3 : 5. Give the Journal entry to distribute 'Workmen Compensation Reserve' of ₹ 1,20,000 at the time of change in profitsharing ratio, when:
(i) no information is given; (ii) there is no claim against it.
Solution
(i) & (ii)
Journal
Date 
Particulars 
L.F. 
Debit Amount (₹) 
Credit Amount (₹) 


Workmen Compensation Reserve A/c 
Dr. 

1,20,000 


To A’s Capital A/c 



60,000 

To B’s Capital A/c 



36,000 

To C’s Capital A/c 



24,000 

(Workmen Compensation Reserve distributed) 




Note:
In the both the cases, Workmen Compensation Reserve should be distributed in old ratio i.e., 5:3:2.
Is there an error in this question or solution?
APPEARS IN
Solution A, B And C Who Are Presently Sharing Profits and Losses in the Ratio of 5 : 3 : 2 Decide to Share Future Profits and Losses in the Ratio of 2 : 3 : 5 Concept: Retirement and Death of a Partner  Calculation of New Profit Sharing Ratio.