Based on following case, answer question.

Nayana and Arushi were partners sharing profit equally. Their Balance Sheet as at March 31, 2017 was as follows:

The firm was dissolved on the above date:

(1) Nayana took over 50% of the stock at 10% less on its book value, and the remaining stock was sold at a gain of 15%. Furniture and Machinery realised for ₹30,000 and ₹50,000 respectively.
(2) There was an unrecorded investment which was sold for ₹34,000
(3) Debtors realised 90% only and ₹1,200 were recovered for bad debts written-off last year.
(4) There was an outstanding bill for repairs which had to be paid for ₹2,000

What will be the treatment of Workman Compensation Reserve at the time of dissolution?

Nayana's and Arushi's Capital A/c will be credited with ₹7,500 each and workmen Compensation account will be debited with ₹15,000.

The correct answer is Option (4) → Nayana's and Arushi's Capital A/c will be credited with ₹7,500 each and workmen Compensation account will be debited with ₹15,000.

Workmen compensation reserve is an accumulated reserve and there is no claim regarding it so it will be distributed between partners in their old ratio. As ratio is not given which means profits and losses are shared equally. So, the following journal entry is passed for this-
Workman Compensation Reserve A/c Dr. 15,000
     To Nayana’s Current A/c                                      7,500
     To Arushi’s Current A/c                                        7,500
(Compensation fund transferred to partners’ Current account)