At dissolution, an unrecorded asset is sold for cash. Which entry correctly records the transaction?
Correct answer: B. Debit Cash Account and credit Realisation Account
- A. Debit Realisation Account and credit Cash Account
- B. Debit Cash Account and credit Realisation Account
- C. Debit Unrecorded Asset Account and credit Cash Account
- D. Debit Cash Account and credit Capital Accounts
Explanation
An unrecorded asset has no existing book balance to transfer. The cash received is debited, while the gain from its realization is credited to the Realisation Account.
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About Partnership Accounts
Partnership accounts cover the partnership agreement, capital and current accounts, profit and loss appropriation, salaries, interest on capital, interest on drawings and profit-sharing ratios. They also address changes in partnership, including admission, retirement, goodwill, revaluation, dissolution and the settlement of partners’ balances.
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