The journal entry for realisation of an unrecorded asset of 5,500 is :
(1) Cash A/c Dr5,500
To realisation a/c 5,500
(2) Realisation A/c Dr 5000
To cash 5,000
(3) Cash A/c Dr 5,500
To unrecorded assets 5,500
(4) Unrecorded asset A/c Dr 5,500
To realisation A/c 5,500
This question was previously asked in
Shift 07/06/2023 3:30 PM - 6:30 PM
A
Cash A/c Dr5,500To realisation a/c 5,500
B
Realisation A/c Dr 5000To cash 5,000
C
Cash A/c Dr 5,500To unrecorded assets 5,500
D
Unrecorded asset A/c Dr 5,500To realisation A/c 5,500
Correct Answer
Cash A/c Dr5,500To realisation a/c 5,500
Detailed Explanation
When an unrecorded asset is realized, it needs to be appropriately accounted for in the books. The journal entry for the realization of an unrecorded asset of 5,500 would be as follows:
(1) Cash A/c Dr 5,500
To Unrecorded Asset A/c 5,500
The entry recognizes the increase in the Cash Account with a debit entry and the corresponding recognition of the unrecorded asset in the books with a credit entry to the Unrecorded Asset Account. This reflects the actual inflow of cash and the addition of the asset to the balance sheet.
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