If accrued commission of ₹6,000 has not been recorded in the firm’s books and is recorded at the time of reconstitution, which entry will be passed?

Correct answer: Asset Account Dr. and Revaluation Account Cr.

Accrued commission is income receivable by the firm, so it is treated as an unrecorded asset. On recording it, the Asset Account is debited and the Revaluation Account is credited. This credit represents a gain, which is transferred to the old partners’ capital accounts. Option B would apply to an unrecorded liability, and no cash entry is made because the amount is only accrued, not received. Exam tip: For an unrecorded asset, remember Asset Dr. To Revaluation.