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What does the discovery of an unrecorded liability at the time of dissolution indicate?

Answer and explanation

Correct answer: Additional liability

It means that the firm had an obligation which had not previously been recorded in its books. If it is paid in cash or through the bank, the Realisation Account is debited and the Cash/Bank Account is credited. It is not an additional asset because it increases the firm’s liabilities. Exam tip: Record an unrecorded liability through the Realisation Account during dissolution.

Related tags

Partnership DissolutionUnrecorded LiabilityRealisation AccountAccounting EntriesClosing The BusinessDissolution Of A Partnership FirmAccountancyClass 12 Mcq

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