All Treatment of Workmen Compensation Reserve in Dissolution Class 12

Looking for various Accounting Treatment of Workmen Compensation Reserve in Dissolution of Partnership Firm.

I will below two proplem regarding the accounting treatment of workmen compensation reserve.

1. What is the treatment of workmen compensation reserve in Realisation Account?

2. How is workmen compensation reserve shown in the balance sheet of a partnership firm treated at the time of its dissolution?

Case – 1

When Liability against workmen compensation Reserve does not Exist or No information is given of liability for Workmen Compensation

In this case, it is assumed that no claim or liability arises against the workmen compensation reserve. Therefore whole amount of workmen compensation reserve is distributed among the partners in their old profit sharing ratio.

The Journal entry is

Workmen Compensation Reserve A/c Dr.
To Partner’s Capital A/cs

Case – 2

When Liability of Workmen Compensation is less than the amount of Workmen Compensation Reserve

In this case, amount equal to liability is treansferred (credited) to Realisatoin Account and the balance amount of Workmen Compensation Reserve is transferred (credited) to Capital Accounts of partners in their profit sharing ratio.

The Journal entry are:

Workmen Compensation Reserve A/c Dr.
To Realisation A/c
To Partner’s Capital A/cs
(Being WCR transferred to Realisation a/c and remaining distributed among partners)

Realisation A/c Dr.
To Bank A/c
(Being WCC paid)

Case – 3

Liability of Wokrmen Compensation is equal to the amount of Workmen Compensation Reserve

The total amount of Workmen Compensation Reserve is transferred (credited) to Realisation Account.

The Journal Entry is:

Workmen Compensation Reserve A/c Dr.
To Realisation A
(WCR transferred to realisation a/c)

Realisation A/c Dr.
To Bank A/c
(Being WCC paid)

Case – 4

Liability of Workmen Compensation is more than the amount of Workmen Compensation Resreve

The total amount of Workmen Compensation Reserve is transferred (credited) to Realisation Account.

The Journal Entry is:

Workmen Compensation Reserve A/c Dr.
To Realisation A/c
(Being WCR transferred to realisation a/c)

Realisation A/c Dr.
To Bank A/c
(Being WCC paid)