Workmen compensation reserve appearing in the balance sheet on the date if no information is available for the same will be: a) Distributed to the partner in the old profit-sharing ratio. b) Distributed to the partner in a new profit-sharing ratio. c) Distributed to the partner in capital ratio. d) Carried forward to new balance sheet without any adjustment
Answer (1)
In the context of partnership accounts and adjustments in a balance sheet, if there is a Workmen Compensation Reserve appearing in the balance sheet and no specific information is provided regarding any compensation Claims, it is typically treated in the following way:
The Workmen Compensation Reserve is meant to cover potential liabilities or claims related to employee compensation. However, when dissolving a partnership or adjusting for changes in the partnership (such as changes in the profit-sharing ratio), these reserves may need to be dealt with under certain principles.
Distributed to the Partners in the Old Profit-Sharing Ratio:
When a reserve or fund such as the Workmen Compensation Reserve is present and no claims or liabilities are identified, the usual practice in partnerships is to distribute it among the partners in an agreed-upon manner.
Generally, the default method is to allocate such reserves in the old profit-sharing ratio among the partners.
Therefore, the correct option is (a) Distributed to the partners in the old profit-sharing ratio.
This approach allocates the reserve funds back to the partners based on the profit-sharing arrangement that was in place before any changes were made. This ensures that the funds are returned equitably to the partners in accordance with their original investments and agreements.
These types of adjustments are important to ensure fairness and transparency during changes in the partnership structure or during final settlements.
