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 utilized in partnership dissolution to document assets and liabilities at the business's closure.
Step 2: Treatment of Unrecorded Liabilities
When partners settle unrecorded liabilities, the Realisation Account is debited to acknowledge the payment of these obligations.
Step 3: Corresponding Credit Entry
The credit entry will be to the partners' capital accounts or the cash/bank account, contingent on the payment method.
Step 4: Conclusion
Consequently, unrecorded liabilities settled by partners are reflected on the debit side of the Realisation Account.