Question

Unrecorded liabilities, when paid are shown in

• A. Debit side of Realisation A/c
• B. Debit side of Bank A/c
• C. Credit side of Realisation A/c
• D. Debit side of Cash A/c

Hint:

Rule of thumb for Realisation Account: All realization expenses and payments of liabilities go to the \textbf{Debit} side. All receipts from the sale of assets (recorded or unrecorded) go to the \textbf{Credit} side.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
At the time of dissolution of a partnership firm, a Realisation Account is prepared to close the books of accounts and determine the net profit or loss on the realization of assets and settlement of liabilities.

Step 2: Detailed Explanation:
An unrecorded liability is a liability that is not present in the balance sheet but must be paid off during dissolution.
When any liability (recorded or unrecorded) is paid, it represents an expense or an outflow of funds for the firm during the realization process. All such expenses and payments are debited to the Realisation Account to accurately calculate the final profit/loss.
The journal entry passed is:
Realisation A/c \dots Dr.
\hspace*{1cm} To Cash/Bank A/c
Therefore, the payment is recorded on the debit side of the Realisation Account.

Step 3: Final Answer:
Unrecorded liabilities paid are shown on the Debit side of the Realisation A/c.