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Unrecorded asset when realised (in cash) will be _________
- a)Credited to partners capital account
- b)Debited to Realisation Account
- c)Debited to Partners capital account
- d)Credited to Realisation Account
Correct answer is option 'D'. Can you explain this answer?
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Unrecorded asset when realised (in cash) will be _________a)Credited t...
Unrecorded asset (if any) given in the additional information, which is realized (sold) at the time of dissolution, should be shown in the credit side of Realisation Account because realized value of all the assets is recorded in the credit side of Realisation Account.
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Unrecorded asset when realised (in cash) will be _________a)Credited t...
Explanation:
When an unrecorded asset is realized in cash, it means that the asset, which was not previously recorded in the books of accounts, has been sold or disposed of and the proceeds have been received in cash. In such a situation, the accounting treatment for the realization of the unrecorded asset is as follows:
Debited to Realisation Account:
The Realisation Account is a temporary account that is created during the dissolution of a partnership firm. It is used to record all the assets and liabilities that are realized or settled during the process of winding up the business. When an unrecorded asset is realized in cash, it is debited to the Realisation Account because this account captures all the gains or losses arising from the realization of assets.
Credited to Partners' Capital Account:
The partners' capital accounts are the individual accounts maintained for each partner in a partnership firm. These accounts record the capital contributions made by the partners, their share of profits or losses, and any drawings or withdrawals made by them. When an unrecorded asset is realized in cash, the gain or loss on the realization is ultimately distributed among the partners based on their profit-sharing ratio. Therefore, the cash proceeds from the realization are credited to the partners' capital accounts.
In conclusion, when an unrecorded asset is realized in cash, it is debited to the Realisation Account to capture the gain or loss on realization. The cash proceeds from the realization are then credited to the partners' capital accounts, as these accounts reflect the distribution of profits or losses among the partners.
When an unrecorded asset is realized in cash, it means that the asset, which was not previously recorded in the books of accounts, has been sold or disposed of and the proceeds have been received in cash. In such a situation, the accounting treatment for the realization of the unrecorded asset is as follows:
Debited to Realisation Account:
The Realisation Account is a temporary account that is created during the dissolution of a partnership firm. It is used to record all the assets and liabilities that are realized or settled during the process of winding up the business. When an unrecorded asset is realized in cash, it is debited to the Realisation Account because this account captures all the gains or losses arising from the realization of assets.
Credited to Partners' Capital Account:
The partners' capital accounts are the individual accounts maintained for each partner in a partnership firm. These accounts record the capital contributions made by the partners, their share of profits or losses, and any drawings or withdrawals made by them. When an unrecorded asset is realized in cash, the gain or loss on the realization is ultimately distributed among the partners based on their profit-sharing ratio. Therefore, the cash proceeds from the realization are credited to the partners' capital accounts.
In conclusion, when an unrecorded asset is realized in cash, it is debited to the Realisation Account to capture the gain or loss on realization. The cash proceeds from the realization are then credited to the partners' capital accounts, as these accounts reflect the distribution of profits or losses among the partners.
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Unrecorded asset when realised (in cash) will be _________a)Credited to partners capital accountb)Debited to Realisation Accountc)Debited to Partners capital accountd)Credited to Realisation AccountCorrect answer is option 'D'. Can you explain this answer?
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