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When an unrecorded liability is paid, which account is debited?

Answer and explanation

Correct answer: Realisation Account

An unrecorded liability paid during dissolution is treated as a realisation expense. Therefore, the Realisation Account is debited, while Cash or Bank is credited for the amount paid. Hence, option A is correct. Exam tip: Payments made to settle liabilities during dissolution generally appear on the debit side of the Realisation Account.

Related tags

Partnership DissolutionRealisation AccountUnrecorded LiabilitiesAccounting EntriesClosing The BusinessDissolution Of A Partnership FirmAccountancyClass 12 Mcq

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