Question

Assertion (A): When Workmen Compensation Reserve appearing in the Balance Sheet is more than the claim against it, the excess of such reserve is credited to old partners in their old profit-sharing ratio.

Reason (R): Workmen Compensation Reserve is a reserve created out of past profits and hence distributed among old partners in their old ratio.

In the context of the above two statements, which of the following is correct?

Options

• (A) and (R) both are correct and (R) correctly explains (A).

• Both (A) and (R) are correct but (R) does not explain (A). 

• Both (A) and (R) are incorrect.

• (A) is correct but (R) is incorrect.

Answer 1

(A) and (R) both are correct and (R) correctly explains (A).