Question

How will you deal with unrecorded assets and liabilities at the time of dissolution of a firm?

Answer 1

Unrecorded assets are those not appearing in the Balance Sheet, such as a plant that has been fully written off but still physically exists. Likewise, unrecorded liabilities are obligations not reflected in the Balance Sheet. Since these items carry no book value, they are not transferred to the Realisation Account. Their accounting treatment is as follows:

(i)	When unrecorded asset is sold for Cash.	Cash/Bank A/c     ...Dr.	With realised value
		To Realisation A/c
(ii)	When unrecorded asset is taken over by a partner.	Partner’s Capital A/c    ...Dr.	With agreed price
		To Realisation A/c
(iii)	When unrecorded liability is paid in Cash.	Realisation A/c   ...Dr.	With actual payment
		To Cash/Bank A/c
(iv)	When a partner agrees to settle unrecorded liability.	Realisation A/c    ...Dr.	With agreed amount
		To Partner’s Capital A/c