Based on following Balance Sheet of Tarnav and Manav as at 31^st March 2022, answer question:

                       Balance Sheet as at 31^st March 2022

On that date the firm was dissolved on the following term:

(i) Tarnav promised to pay Sanjay's loan and took over stock in trade at ₹4,000.
(ii) Creditors payable after one month, were paid immediately at 6% discount.
(iii) Debtors of ₹1,000 proved bad, plant realised 130%.
(iv) Expenses on Realisation were ₹1,500 borne and paid by Manav.
(v) Manav took over an old computer completely written off from the book at ₹500.

Workman Compensation Reserve will be transferred to:

Credit side of Partners' Capital A/c

The correct answer is Option (1) - Credit side of Partners' Capital A/c.

Workman Compensation Reserve is an accumulated reserve of the firm against which no claim exists so all the reserve amount is transferred to partners account.

Sometimes a firm may have accumulated profits not yet transferred to capital accounts of the partners. These are usually in the form of general reserve, reserve and/or Profit and Loss Account. These are distributed among the partners by transferring it to their capital current accounts in old profit sharing ratio. Similarly, if there are some accumulated losses in the form of a debit balance of profit and loss account and/or deferred revenue expenditure appearing in the balance sheet of the firm, they are also debited to partners capital A/c.