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mediumMCQCUET Accountancy 2025 2 June Shift 22026CUET Accountancy
1 mark

When an unrecorded asset is taken over by a creditor in full settlement of their claim during dissolution, the transaction is:

  1. A
    Realization account is debited.
  2. B
    Realization account is credited.
  3. C
    Creditors' account is debited.
  4. D
    Not recorded anywhere.

Solution & Step-by-step Explanation

When a liability (creditor) is settled by transferring an asset (whether recorded or unrecorded) in full satisfaction of the claim, the asset and liability accounts offset each other. As a result, no journal entry is recorded in the books of accounts for this transaction.

Practice this question

Try it yourself before checking the explanation above.

When an unrecorded asset is taken over by a creditor in full settlement of their claim during dissolution, the transaction is:
A
Realization account is debited.
B
Realization account is credited.
C
Creditors' account is debited.
D
Not recorded anywhere.

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