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Question
How is workmen compensation reserve shown in the balance sheet of a partnership firm, treated at the time of its dissolution?
Short Answer
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Solution
The portion of the workmen compensation reserve equal to the actual liability is credited to the realisation account, while any remaining balance is credited to the partner’s capital accounts in their profit-sharing ratio. If there is no liability related to workmen compensation, the entire reserve is credited to the partner’s capital accounts.
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