In case of admission of a partner, what will be the journal entry for unrecorded investments?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Debit Investment A/c and Credit Revaluation A/c.
When a new partner is admitted into a partnership and unrecorded investments are discovered (e.g. assets that existed but were not recorded in the books), the partnership must record these assets before the new partner is admitted. So, revaluation is prepared to record the assets. So, the journal entry will be-
Investment A/c Dr
To Revaluation A/c
(Unrecorded assets recorded)