At the time of dissolution of a partnership firm, in which account is the amount paid to creditors debited?

Correct answer: Realisation Account

When creditors are paid on dissolution, the Realisation Account is debited and the Cash or Bank Account is credited. Therefore, the correct answer is Realisation Account. Although the actual money is paid from cash or bank, the expense or settlement is recorded through the Realisation Account. Exam tip: For payment of an external liability, remember the entry: Realisation A/c Dr. To Cash/Bank A/c.