Question

At the time of admission of a partner, the Balance Sheet of the firm showed a workmen compensation reserve of ₹ 80,000. The claim for workmen compensation was estimated at ₹ 1,00,000. The shortfall of ₹ 20,000 will be ______.

Options

• debited to Revaluation Account

• credited to Revaluation Account

• debited to Partners’ Capital Accounts

• credited to Partners’ Capital Accounts

Answer 1

At the time of admission of a partner, the Balance Sheet of the firm showed a workmen compensation reserve of ₹ 80,000. The claim for workmen compensation was estimated at ₹ 1,00,000. The shortfall of ₹ 20,000 will be debited to Revaluation Account.

Explanation:

There is a ₹ 20,000 gap because the expected claim is ₹ 1,00,000, but the workmen’s compensation reserve was ₹ 80,000. The Revaluation Account, which accounts for any shifts in the value of assets or duties during a partner’s admission, is debited for this gap, which is viewed as a loss.