Question:
At the time of admission of a partner, the Balance Sheet of the firm showed a workmen compensation reserve of \rupee80,000. The claim for workmen compensation was estimated at \rupee1,00,000. The shortfall of \rupee20,000 will be:
At the time of admission of a partner, the Balance Sheet of the firm showed a workmen compensation reserve of \rupee80,000. The claim for workmen compensation was estimated at \rupee1,00,000. The shortfall of \rupee20,000 will be:
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For admission of a partner, shortfalls in reserves or provisions are debited to the Revaluation Account and adjusted among the old partners in their profit-sharing ratio.
Updated On: Jan 28, 2025
- debited to Revaluation Account
- credited to Revaluation Account
- debited to Partners’ Capital Accounts
- credited to Partners’ Capital Accounts
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The Correct Option is A
Solution and Explanation
The workmen compensation reserve of \rupee80,000 is used to cover the claim of \rupee1,00,000. The shortfall of \rupee20,000 is treated as a liability and is debited to the Revaluation Account at the time of admission of a partner.
Calculation:
\[
\text{Shortfall} = \rupee1,00,000 - \rupee80,000 = \rupee20,000.
\]
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