When an unrecorded asset is realized (sold for cash) during dissolution, the firm receives money for an asset that was never recorded in the books.
Since the asset was unrecorded, there is no asset account to credit. The cash received from its sale represents a gain for the firm, which must be recorded in the Realization Account.
The journal entry recorded is:
Bank Account Dr.
To Realization Account
Bank Account is debited because cash is received.
Realization Account is credited because this represents a gain to the realization process. The Realization Account collects all gains and losses during dissolution, and the proceeds from unrecorded assets form part of the overall profit or loss on realization.
This profit from the Realization Account is ultimately distributed among the partners in their profit-sharing ratio.
Correct Option: 4 - Bank Account Debit & Realization Account Credit.