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DISSOLUTION OF A PARTNERSHIP FIRM, , 5.6, Contingency Reserve A/c “i, Profit & Loss A/c r., Workmen Compensation Reserve A/c Dr., , To Partner’s Capital A/cs :, (Undistributed profits transferred to Capital A/cs), , Workmen ompensation Reserve :, This reserve is created out of profits of the firm to meet the claim for Compensation, by workers. At the time of dissolution, this reserve is dealt with as follows , (i) In case, there is no liability against Workmen Compensation Reserve li, such a case, the entire amount of Workmen Compensation Reserve is Credite, to the Capital Accounts of partners in their profit sharing ratio. The Journal, Entry is :, , Workmen Compensation Reserve A/c Dr., To Partner’s Capital A/cs, (ii) In case, the amount of liability is less than the amount of Workmen, Compensation Reserve : Amount equal to liability is Credited to Realisation, Account and the remaining amount is Credited to Partners’ Capital Accounts, in their profit sharing ratio. (Suppose Workmen Compensation Reserve js, %20,000 and liability for claim is 8,000) : The Journal Entry is :, , Workmen Compensation Reserve A/c Dr. 20,000, To Realisation A/c 8,000, To Partner’s Capital A/cs 12,000, , (iii) In case, the amount of liability is equal to the amount of Workmen, Compensation Reserye : The amount of Workmen Compensation Reserve is, Credited to Realisation Account. The Journal Entry is :, , Workmen Compensation Reserve A/c Dr., To Realisation A/c, , (iv) In case, the amount of liability is more than the amount. of Workmen, Compensation Reserve : The entire amount of Workmen Compensation, Reserve is transferred to Realisation Account. (Suppose Workmen, Compensation Reserve is 20,000 and liability for claim is 25,000). The, Journal entry is :, , Workmen Compensation Reserve A/c Dr. 20,000, To Realisation A/c ane, , , , ILLUSTRATION 1., Lavanya and Priya were partners sharing profits in the ratio of 2 : 1. Pass journal, entries for the following transactions at the time of dissolution of firm :, (i) Workmen Compensation Reserve stood at 2 1,50,000 in the Balance Sheet -”, there was no liability towards Workmen Compensation., (#) Workmen Compensation Reserve stood at ¥1,50,000 in the Balance sheets!, liability in respect of it was ascertained at 90,000., (iii) Workmen Compensation Reserve stood at %1,50,000 in the Balance Sheet, liability in respect of it was ascertained at %1,50,000., , and