When an unrecorded liability discovered at the time of dissolution is paid, on which side of which account is it recorded?

Correct answer: Debit side of Realisation Account

Payment of an unrecorded liability at dissolution is treated as a loss or settlement expense in the Realisation Account. Therefore, the Realisation Account is debited and Cash Account is credited. Hence, option A is correct. Option B is incorrect because the Realisation Account is credited when an unrecorded asset is realised, not when an unrecorded liability is paid. Exam tip: Unrecorded assets realised are credited to Realisation Account, whereas unrecorded liabilities paid are debited to it.