Question

When unrecorded liabilities are paid off by partners, these liabilities are shown in:

• A. Debit side of Realisation Account
• B. Credit side of Realisation Account
• C. Debit side of Bank Account
• D. Credit side of Bank Account

Hint:

Payments of unrecorded liabilities by partners are debited to the Realisation Account in dissolution.

Answer 1

The Correct Option is A

Step 1: Understanding Realisation Account
The Realisation Account is used in partnership dissolution to record assets and liabilities at the time of closing the business.
Step 2: Treatment of unrecorded liabilities
When unrecorded liabilities are paid by partners, the amount is debited to the Realisation Account to recognize the payment of those liabilities.
Step 3: Corresponding credit
The partners’ capital accounts or cash/bank account may be credited depending on the nature of payment.
Step 4: Conclusion
Thus, unrecorded liabilities paid by partners are shown on the debit side of the Realisation Account.