{"id":1445,"date":"2019-06-23T15:52:10","date_gmt":"2019-06-23T15:52:10","guid":{"rendered":"https:\/\/commerceiets.com\/?p=1445"},"modified":"2019-06-23T15:52:10","modified_gmt":"2019-06-23T15:52:10","slug":"treatment-of-workmen-compensation-reserve","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/treatment-of-workmen-compensation-reserve\/","title":{"rendered":"TREATMENT OF WORKMEN COMPENSATION RESERVE"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_64 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/commerceiets.com\/treatment-of-workmen-compensation-reserve\/#WHAT_IS_WORKMEN_COMPENSATION_RESERVE\" title=\"WHAT IS WORKMEN COMPENSATION RESERVE\">WHAT IS WORKMEN COMPENSATION RESERVE<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/commerceiets.com\/treatment-of-workmen-compensation-reserve\/#ACCOUNTING_TREATMENT\" title=\"ACCOUNTING TREATMENT\">ACCOUNTING TREATMENT<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"WHAT_IS_WORKMEN_COMPENSATION_RESERVE\"><\/span>WHAT IS WORKMEN COMPENSATION RESERVE<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Workmen Compensation Reserve is a reserve created out of firm\u2019s profits to meet possible liability to pay compensation to employees, if it arises. It means, a claim may or may not arise. It also means that claim may be higher than amount of reserve. The Treatment of Workmen Compensation Reserve represented by compensation payable to workers is an external liability and the balance of amount left, if any, is an internal liability payable to partners.<\/p>\n\n\n\n<p>The Treatment of Workmen Compensation Reserve  is as follows:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"586\" height=\"340\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/image-3.png\" alt=\"\" class=\"wp-image-1446\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/image-3.png 586w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/image-3-300x174.png 300w\" sizes=\"(max-width: 586px) 100vw, 586px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"ACCOUNTING_TREATMENT\"><\/span>ACCOUNTING TREATMENT<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"has-background has-medium-font-size has-luminous-vivid-amber-background-color\"><strong>IF NO LIABLITY OR CLAIM EXIST AGAINST WORKMEN COMPENSATION RESERVE<\/strong><\/p>\n\n\n\n<p>In such a case, entire amount of Workmen Compensation Reserve is transferred to the Old <a href=\"https:\/\/commerceiets.com\/partners-capital-accounts\/\">Partner\u2019s Capital<\/a>\/ Current Accounts in their old profit-sharing ratio.<\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>Workmen Compensation Reserve A\/c&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dr.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br \/>             To Old Partner\u2019s   Capital\/ Current A\/cs&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(in   old ratio)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;    <br \/>(Being the amount of Workmen Compensation Reserve credited to Old   <br \/>Partner\u2019s Capital Accounts in their old profit sharing ratio)   <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p class=\"has-background has-medium-font-size has-luminous-vivid-amber-background-color\"><strong>IF CLAIM FOR WORKMEN COMPENSATION EXIST<\/strong><\/p>\n\n\n\n<p>In such a situation, treatment of Workmen Compensation\nReserve depends on the amount of liabilities. There can be three possible\nsituations:<\/p>\n\n\n\n<p class=\"has-background has-very-light-gray-background-color\"><strong><em>If the claim is lower than the amount of Workmen Compensation Reserve: <\/em><\/strong><\/p>\n\n\n\n<p>The amount of estimated claim is transferred to Provision for Workmen Compensation Claim Account and excess Workmen Reserve over the Workmen Compensation Claim is credited &nbsp;to old partners in their old profit sharing ratio.<\/p>\n\n\n\n<p>The journal passed is:<\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>Workmen Compensation Reserve&nbsp;   A\/c\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026.Dr.   &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br \/>                To Provision for Workmen Compensation Claim A\/c   &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br \/>                <br \/>                To Old partner\u2019s   Capital\/ Current A\/cs   <br \/>(Being the provision for estimated claim made and balance transferred   <br \/>to Old Partner\u2019s Capital Accounts in their old profit sharing ratio)   <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p class=\"has-background has-very-light-gray-background-color\"><strong><em>If the claim is equal to the Workmen Compensation Reserve: <\/em><\/strong><\/p>\n\n\n\n<p>Workmen Compensation Reserve is transferred to Provision for Workmen Compensation Claim Account and no amount is left for distribution among the old partners.<\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>   Workmen Compensation Reserve A\/c\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026Dr.   &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br \/>                   To Provision   for Workmen Compensation Claim A\/c   <br \/>(Being provision made for Workmen Compensation Claim)   <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p class=\"has-background has-very-light-gray-background-color\"><strong><em>If the claim is higher than the amount of Workmen Compensation Reserve: <\/em><\/strong><\/p>\n\n\n\n<p>The amount of Workmen Compensation reserve is transferred to Provision for Workmen Compensation Claim Account and shortage being a loss, is debited to Revaluation Account.<\/p>\n\n\n\n<p>The journal entries passed are:<\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>Workmen Compensation Reserve A\/c\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026..\u2026Dr.   <br \/>Revaluation A\/c\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026.Dr.   &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br \/>            To Provision for   Workmen Compensation Claim A\/c   <br \/>(Being the amount of claim debited to Workmen Compensation Reserve   and Revaluation Account)   <br \/>Old Partner\u2019s Capital\/ Current A\/cs\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026..Dr.   &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br \/>                    To Revaluation   A\/c   <br \/>(Being the loss on Revaluation is transferred to Capital or current<br \/>Accounts of old partners in their old ratio)   <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p>In case, Claim for Workmen Compensation is determined or\naccepted, it becomes a liability. In this case, Workmen Compensation Claim\nAccount is credited instead of Provision for Workmen Compensation Claim Account.\n<\/p>\n\n\n\n<p class=\"has-background has-medium-font-size has-luminous-vivid-amber-background-color\"><strong>WHEN PARTNERS DECIDE NOT TO CLOSE THE WORKMEN COMPENSATION RESERVE<\/strong><\/p>\n\n\n\n<p>In this case the gaining partner compensate <a href=\"https:\/\/commerceiets.com\/sacrificing-ratio\/\">sacrificing<\/a> partner proportionately of the amount of workmen compensation reserve against which there is no liability.<\/p>\n\n\n\n<p>The journal entry passed is: <\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>   Gaining Partner Capital\/ Current A\/c\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026Dr.   &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br \/>                To Sacrificing   Partner\u2019s Capital\/ Current A\/c   <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p class=\"has-background has-cyan-bluish-gray-background-color\"><strong>EXAMPLE: <\/strong>A, B and C are sharing profits and losses in the ratio of 4:3:2, decided to take D as a partner for 1\/5<sup>th<\/sup> share in the firm with effect from 1<sup>st<\/sup> April, 2018. On this day the Workmen Compensation Reserve showed a balance of \u20b990,000.<\/p>\n\n\n\n<p class=\"has-background has-cyan-bluish-gray-background-color\">Show the treatment in following cases:<\/p>\n\n\n\n<p class=\"has-background has-cyan-bluish-gray-background-color\">Case 1: If there is no other information <\/p>\n\n\n\n<p class=\"has-background has-cyan-bluish-gray-background-color\">Case 2: If a claim on account Workmen Compensation is\nestimated at \u20b945,000<\/p>\n\n\n\n<p class=\"has-background has-cyan-bluish-gray-background-color\">Case 3: If a claim on account of Workmen Compensation is\nestimated at \u20b999,000<\/p>\n\n\n\n<p class=\"has-background has-cyan-bluish-gray-background-color\"><strong>CASE 1: SOLUTION:<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"744\" height=\"210\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Screenshot-2019-06-23-16.08.20.png\" alt=\"\" class=\"wp-image-1447\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Screenshot-2019-06-23-16.08.20.png 744w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Screenshot-2019-06-23-16.08.20-300x85.png 300w\" sizes=\"(max-width: 744px) 100vw, 744px\" \/><\/figure>\n\n\n\n<p class=\"has-background has-cyan-bluish-gray-background-color\"><strong>CASE 2: SOLUTION:<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"225\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Screenshot-2019-06-23-16.10.25.png\" alt=\"\" class=\"wp-image-1448\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Screenshot-2019-06-23-16.10.25.png 700w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Screenshot-2019-06-23-16.10.25-300x96.png 300w\" sizes=\"(max-width: 700px) 100vw, 700px\" \/><\/figure>\n\n\n\n<p class=\"has-background has-cyan-bluish-gray-background-color\"><strong>CASE 3: SOLUTION:<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"724\" height=\"338\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Screenshot-2019-06-23-16.08.05.png\" alt=\"\" class=\"wp-image-1449\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Screenshot-2019-06-23-16.08.05.png 724w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/06\/Screenshot-2019-06-23-16.08.05-300x140.png 300w\" sizes=\"(max-width: 724px) 100vw, 724px\" \/><\/figure>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>WHAT IS WORKMEN COMPENSATION RESERVE Workmen Compensation Reserve is a reserve created out of firm\u2019s profits to meet possible liability to pay compensation to employees, if it arises. It means, a claim may or may not arise. It also means that claim may be higher than amount of reserve. The Treatment of Workmen Compensation Reserve&#8230;<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/treatment-of-workmen-compensation-reserve\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;TREATMENT OF WORKMEN COMPENSATION RESERVE&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":1452,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19,21],"tags":[49],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/1445"}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=1445"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/1445\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/1452"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=1445"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=1445"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=1445"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}