Unrecorded Assets Partnership Accounts

Introduction

Today we will learn about the adjustment for unrecorded assets in partnership accounts at the time of reconstitution of partnership.

The adjustment will be done in a similar manner whether you are doing admission, retirement, death or change in profit ratio question.

For understanding this adjustment we will take the example of investment but you can consider any other asset in place of investment

Types of Language in Question

• a) Unrecorded investments of Rs 5000 are to be accounted
• b) Unrecorded investments were valued at Rs 5000
• c) There is an unrecorded investment worth Rs 5000
• d) Investments of Rs 5000 not mentioned in Balance Sheet were to be taken into account

There can be more variations. But whatever the language in question , the adjustment will be done in similar manner as explained below

What are unrecorded assets

It means those assets which are having zero book value as on the date of reconstitution.

Unrecorded assets can be of two types.

• Those assets which were not recorded in the books of accounts so now they have zero book value.
• Those assets which were recorded in the books of accounts earlier, but now they are completely written off. Completely written off means that their book value is fully transferred to profit and loss account and now such assets have zero book value.

Adjustment for unrecorded Assets

We have an asset which is not having any book value. When we record it in the books of accounts, then the book value of the asset will increase, from zero to the current market value as given in question.

Since there is increase in the book value of an asset so there will be profit .

Journal Entry for Unrecorded Assets

Since there is increase in the asset value so asset account will get debited . In our example investments account will get debited.

Since there is profit so revaluation account will get credited . Final Journal entry is show below:

• Investment A/c Dr.. Rs 5000
  • To Revaluation A/c Rs 5000

Unrecorded Assets in Revaluation Account

Since there is profit, so the amount of profit will be shown on the credit side of Revaluation account. Nothing will come on the debit side of revaluation account.

Unrecorded Assets in Balance Sheet

In balance sheet the value of respective asset will be increased . In our example the value of investments will increase by rupees 5000. There will be no impact on the liabilities side of the Balance Sheet

Unrecorded Assets in partner Capital Account

There will be no impact of this adjustment in the partner capital account. The reason is that the partner capital account was not affected in the journal entry.

Conclusion

We have taken the example of investments . But question can come for any other asset like building machinery, vehicles etc. The treatment will be seen as explained above. Just replace investments by asset given in the question .