On reconstitution of a partnership firm, recording of an unrecorded liability will ultimately result in which of the following?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- Loss to the existing partners.
On reconstitution of a partnership firm, recording of an unrecorded liability will ultimately result in loss to the existing partners.
On recording unrecorded liability, The journal entry will be-
Revaluation A/c Dr.
To Unrecorded liability
On reconstitution of a partnership firm, recording of an unrecorded liability will result in loss to the partnership firm. This loss will distributed in the existing partners so ultimately it is the loss for the existing partners.