Accountancy Part AAccounting for Partnership

At the time of admission of a new partner, in case there is no workme…

At the time of admission of a new partner, in case there is no workmen's compensation claim, the total amount of workmen's compensation fund will be:-

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Credited to old partners' capital account in their old profit sharing ratio

Workmen's Compensation Fund is a reserve kept aside out of past profits to meet claims of workers. If there is no claim, the whole fund is an accumulated profit earned before the new partner joined. So it belongs to the old partners and is credited to their capital accounts in the old ratio; the new partner gets no share in it.

Why the other options are incorrect

Option (2) Debited to old partners' capital account in their old profit sharing ratio — Incorrect. A reserve is a gain for the partners, so it is credited, not debited.
Option (3) Credited to old partners' capital account in their new profit sharing ratio — Incorrect. The profit was earned under the old arrangement, so the old ratio applies.
Option (4) Debited to old partners' capital account in their new profit sharing ratio — Incorrect. Both the side and the ratio are wrong: it is a credit in the old ratio.

NCERT (2026-27 edition):
Adjustment for Accumulated Profits and Losses – “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. The new partner is not entitled to have any share in such accumulated profits. These are distributed among the partners by transferring it to their capital current accounts in old profit sharing ratio.”

At the time of admission of a new partner, in case there is no workmen's compensation claim, the total amount of workmen's compensation fund will be:-

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Credited to old partners' capital account in their old profit sharing ratio

Why the other options are incorrect

Option (2) Debited to old partners' capital account in their old profit sharing ratio — Incorrect. A reserve is a gain for the partners, so it is credited, not debited.
Option (3) Credited to old partners' capital account in their new profit sharing ratio — Incorrect. The profit was earned under the old arrangement, so the old ratio applies.
Option (4) Debited to old partners' capital account in their new profit sharing ratio — Incorrect. Both the side and the ratio are wrong: it is a credit in the old ratio.