Unrecorded Assets are the assets that are completely written off but still physically available in the company or assets that are not shown in the books of the company. Unrecorded assets are generally recorded or recognized at the event of admission, retirement, death of a partner when all the assetRead more
Unrecorded Assets are the assets that are completely written off but still physically available in the company or assets that are not shown in the books of the company.
Unrecorded assets are generally recorded or recognized at the event of admission, retirement, death of a partner when all the assets and liabilities are revalued or dissolution of the firm.
Since Accounting Standards require firms to record all the assets and liabilities in their books, it is therefore mandatory to record such unrecorded assets.
There can be two cases for treatment of such unrecorded assets:
- Unrecorded Asset entered into the business and recorded in books
Unrecorded Asset A/c (Dr.) | Amt | |
 To Revaluation A/c | Amt |
The unrecorded asset is now debited since it has to be recorded in the books now and Revaluation Account is credited since it is again for the business which will eventually be transferred to Partners’ Capital Account.
- Unrecorded Asset taken over by a partner and paid cash Â
Cash A/c (Dr.) | Amt | |
 To Partners’ Capital A/c | Amt |
If a partner decides to take over an unrecorded asset then his account is credited with that amount and since cash paid by the partner comes into business Cash Account is debited.
- Unrecorded Asset discovered during Dissolution
Cash/ A/c (Dr) | Amt | |
 To Realization A/c | Amt |
When an unrecorded asset is discovered during the dissolution of the firm, such an asset is sold directly to the outsider and as a result, cash A/c is debited since the cash is entering the business. The entry is made through the Revaluation A/c and it is hence credited.
Example:
At the time of revaluation, firms find a typewriter that has not been recorded in the books and is valued at Rs 10,000. The journal entry to record that typewriter will be:
Typewriter A/c (Dr.) | 10,000 | |
 To Revaluation A/c | 10,000 |
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The profits earned by a company are distributed to its shareholders monthly, quarterly, half-yearly, or yearly in the form of dividends. The dividend payable by the company is transferred to the Dividend Account and is then claimed by the shareholders. If the dividend is not claimed by the members aRead more
The profits earned by a company are distributed to its shareholders monthly, quarterly, half-yearly, or yearly in the form of dividends. The dividend payable by the company is transferred to the Dividend Account and is then claimed by the shareholders.
If the dividend is not claimed by the members after transferring it to the Dividend Account, it is called Unclaimed Dividend. Such a dividend is a liability for the company and it is shown under the head Current Liabilities.
The dividend is transferred from the Dividend Account to the Unclaimed Dividend Account if it is not claimed by the shareholders within 37 days of declaration of dividend.
For the Cash Flow Statement, unclaimed dividend comes under the head Financing Activities.Â
Items shown under the head Financing Activities are those that are used to finance the operations of the company. Since, money raised through the issue of shares finances the company, any item related to shareholding or dividend is shown under the head Financing Activities.
However, there are two approaches to deal with the treatment of Unclaimed Dividend:
First, since there is no inflow or outflow of cash, there is no need to show it in the cash flow statement.
Second, the unclaimed dividend is deducted from the Appropriations, that is, when Net Profit before Tax and Extraordinary Activities is calculated.
Then, it is added under the head Financing Activities because the amount of dividend that has to flow out of the company (that is Dividend Paid amount which has already been deducted from Financing Activities) remained in the company only since it has not been claimed by the members.
The second approach to the treatment of an Unclaimed Dividend is used when the company has not transferred the unclaimed dividend amount from the Dividend Account to a separate account.Â