Question

Amount received from sale of unrecorded asset at the time of dissolution of the firm is credited to ______.

Options

• Partners’ Capital Accounts.

• Profit & Loss Account.

• Realisation Account.

• Cash Account.

Answer 1

Amount received from sale of unrecorded asset at the time of dissolution of the firm is credited to realisation account.

Explanation:

At the time of dissolution, any cash received from selling an asset is treated as a gain from winding up the business. Even though an unrecorded asset does not appear in the balance sheet, the cash received from its sale is a real inflowing profit. Following double-entry rules, the cash or bank account is debited because money is coming in, and the realisation account is credited because it acts as the nominal account tracking all dissolution gains and losses.