Do we really have two kimds of accounts? If it is so then to which a/c we use to pay compensation?
 

Dear Student,
As per prudence concept, losses should be anticipated so for any misshappening in our business we have to create a provision for workmen compensation. But when this liability really materialise we have to pay now and then workmen compensation reserve A/c is used.

Regards

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Entry will be passed as follows:
                          Workmen Compensation Reserve a/c           Dr.
                                                             To Provision for Workmen Compensation Claim
                                                             To Old Partners' capital a/c
and the provision for Workmen Compensation claim is shown at liability side of balance sheet
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What are you looking for?