At the time of admission of partner, Workmen Compensation Claim Excee…

At the time of admission of partner, Workmen Compensation Claim Exceeding Workmen Compensation Fund is transferred to:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Debit of revaluation account

A Workmen Compensation Fund is kept aside for claims of workers. If the claim is larger than the fund, the fund covers only part of it and the excess is a new liability of the firm. An increase in liabilities found on admission is a loss, and losses on reassessment are debited to the Revaluation Account, to be shared by the old partners in their old ratio.

Option (1) Debit of partner capital account — Incorrect. The loss reaches the capital accounts only through the Revaluation Account, as part of its balance.

Option (2) Credit of partner capital account — Incorrect. An extra liability is a loss, so it can never be credited to the partners.

Option (4) Credit of revaluation account — Incorrect. The credit side takes gains (rise in assets, fall in liabilities).

NCERT (2026-27 edition):
Revaluation of Assets and Reassessment of Liabilities – “… For this purpose the firm has to prepare the Revaluation Account. The gain or loss on revaluation of each asset and liability is transferred to this account and finally its balance is transferred to the capital accounts of the old partners in their old profit sharing ratio. In other words, the revaluation account is credited with increase in the value of each asset and decrease in its liabilities because it is a gain and is debited with decrease in the value of assets and increase in its liabilities is debited to revaluation account because it is a loss.”