State the accounting treatment at the time of dissolution of a firm for:
i. Unrecorded assets ii. Unrecorded liabilities
(i) Accounting Treatment for Unrecorded Assets Unrecorded asset is an asset, which have not been shown in the books of account or which has been written off in the books of accounts, but the asset is still available in physical condition. Sometimes it is sold outside for cash and sometimes it is taken away by the partner. The accounting treatment for unrecorded asset will be there according
to the situation.
(a) When the unrecorded asset is sold for cash the following Journal Entry will be there:
Cash A/c. Dr.
To Realisation A/c
(Being unrecorded assets sold for cash)
(b) When the unrecorded asset is taken over by any partner the following Journal Entry will be there:
Partners Capital A/c Dr.
To Realisation A/c
(Being unrecorded assets taken over by the partner)
(ii) Accounting Treatment for Unrecorded Liabilities Unrecorded liabilities are
those liabilities, which have not been shown in the books of account. But at the time of dissolution they are required to be paid off. The following Journal Entry will be there as per situation.
(a) When the unrecorded liability is paid off the following Journal Entry will be there:
Realisation A/c. Dr.
To Cash A/c
(Being unrecorded liability paid in cash)
(b) When the unrecorded liability is taken over by a partner. The following
Journal Entry will be there:
Realisation A/c. Dr.
To Partners Capital A/c
(Being unrecorded liability taken over by the partner)
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